Trio-Tech International 10-K for FY2021
Trio-Tech International (TRT)
10-K
2021-10-01
For: 2021-06-30
View Original
Added on
April 06, 2026
About this 10-K
Trio-Tech International filed this 10-K on October 1, 2021, covering the fiscal year ended June 30, 2021 (FY2021).
Headline figures
Fiscal year ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $32.46M
- down 5.8% from $34.47M a year earlier
- Net loss
- $591K
- compared with net income of $878K a year earlier
- Diluted EPS
- -$0.15
- compared with $0.24 a year earlier
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☑
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the
fiscal year ended June 30, 2021
OR
☐
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
Transition Period from ___ to ___
Commission
File Number 1-14523
TRIO-TECH
INTERNATIONAL
(Exact
name of Registrant as specified in its Charter)
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California
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95-2086631
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
Number)
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Block 1008 Toa Payoh North
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Unit 03-09 Singapore
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318996
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(Address
of Principal Executive Office)
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(Zip
Code)
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Registrant's
Telephone Number: (65) 6265
3300
Securities
registered pursuant to Section 12(b) of the Act:
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Name of
each exchange
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Title
of each class
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Trading
Symbol
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on
which registered
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Common
Stock, no par value
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TRT
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NYSE
American
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Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a
well-known seasoned issuer, as defined in rule 405 of the
Securities Act. ☐
Yes ☑ No
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. ☐
Yes ☑ No
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. ☑Yes ☐ No
Indicate by check mark whether the registrant has submitted every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
☑Yes ☐ No
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definition of
“large accelerated filer,” “accelerated
filer”, “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange
Act. Large Accelerated Filer ☐ Accelerated Filer
☐ Non-Accelerated Filer
(Do not check if a smaller reporting company) ☐ Smaller Reporting Company
☑ Emerging Growth Company ☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). ☐ Yes ☑No
The
aggregate market value of voting stock held by non-affiliates of
Registrant, based upon the closing price of $3.96 for shares of the
registrant’s Common Stock on December 31, 2020, the last
business day of the registrant’s most recently completed
second fiscal quarter as reported by the NYSE American, was
approximately $6,644,000. In calculating such aggregate market
value, shares of Common Stock held by each officer, director and
holder of 5% or more of the outstanding Common Stock (including
shares with respect to which a holder has the right to acquire
beneficial ownership within 60 days) were excluded because such
persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination for
other purposes.
The
number of shares of Common Stock outstanding as of September 1,
2021 was 3,913,055.
Documents
Incorporated by Reference
Part
III of this Form 10-K incorporates by reference information from
Registrant’s Proxy Statement for its 2021 Annual Meeting of
Shareholders to be filed with the Commission under Regulation 14A
within 120 days of the end of the fiscal year covered by this Form
10-K.
TRIO-TECH INTERNATIONAL
INDEX
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Page
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Part I
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Item 1
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Business
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1
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Item 1A
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Risk factors
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5
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Item 1B
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Unresolved staff comments
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5
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Item 2
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Properties
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6
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Item 3
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Legal proceedings
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7
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Item 4
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Mine safety disclosures
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7
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Part II
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Item 5
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Market for registrant’s common equity, related stockholder
matters and issuer purchases of equity securities
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8
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Item 6
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[Reserved]
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8
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Item 7
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Management’s discussion and analysis of financial condition
and results of operations
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9
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Item 7A
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Quantitative and qualitative disclosures about market
risk
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23
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Item 8
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Financial statements and supplementary data
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23
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Item 9
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Changes in and disagreements with accountants on accounting and
financial disclosure
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23
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Item 9A
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Controls and procedures
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23
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Item 9B
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Other information
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24
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Item 9 C
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Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections
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24
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25
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Part III
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Item 10
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Directors, executive officers and corporate governance
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25
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Item 11
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Executive compensation
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25
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Item 12
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Security ownership of certain beneficial owners and management and
related stockholder matters
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25
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Item 13
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Certain relationships and related transactions, and director
independence
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25
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Item 14
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Principal accountant fees and services
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25
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Part IV
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Item 15
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Exhibits and financial statement schedules
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25
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Item 16
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Form 10-K summary
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25
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Signatures
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Exhibits
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Report of independent registered public accounting
firm
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F-1
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Consolidated Balance Sheets as of June 30, 2021 and
2020
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F-2
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Consolidated Statements of Operations and Comprehensive Income for
the Years Ended June 30, 2021 and 2020
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F-3
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Consolidated Statements of Shareholders’ Equity for the Years
Ended June 30, 2021 and 2020
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F-6
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Consolidated Statements of Cash Flows for the Years Ended June 30,
2021 and 2020
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F-7
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Notes to Consolidated Financial Statements
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F-8
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-i-
TRIO-TECH INTERNATIONAL
PART I
ITEM 1 – BUSINESS (IN THOUSANDS, EXCEPT PERCENTAGES AND SHARE
AMOUNTS)
Cautionary Statement Regarding Forward-Looking
Statements
The
discussions of Trio-Tech International’s (the
“Company”) business and activities set forth in this
Form 10-K and in other past and future reports and announcements by
the Company may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
and assumptions regarding future activities and results of
operations of the Company. In light of the “safe
harbor” provisions of the Private Securities Litigation
Reform Act of 1995, the following factors, among others, could
cause actual results to differ materially from those reflected in
any forward-looking statements made by or on behalf of the Company:
market acceptance of Company’s products and services;
changing business conditions or technologies and volatility in the
semiconductor industry, which could affect demand for the
Company’s products and services; the impact of competition;
problems with technology; product development schedules; delivery
schedules; changes in military or commercial testing specifications
which could affect the market for the Company’s products and
services; difficulties in profitably integrating acquired
businesses, if any, into the Company; risks associated with
conducting business internationally and especially in Asia,
including currency fluctuations and devaluation, currency
restrictions, local laws and restrictions and possible social,
political and economic instability; ongoing public health issues
related to the COVID-19 pandemic; credit risks in the Chinese real
estate industry; changes in macroeconomic conditions and credit
market conditions; and other economic, financial and regulatory
factors beyond the Company’s control. In some cases, you can
identify forward-looking statements by the use of terminology such
as “may,” “will,” “expects,”
“plans,” “anticipates,”
“estimates,” “potential,”
“believes,” “can impact,”
“continue,” or the negative thereof or other comparable
terminology.
Unless
otherwise required by law, the Company undertakes no obligation to
update forward-looking statements to reflect subsequent events,
changed circumstances, or the occurrence of unanticipated events.
You are cautioned not to place undue reliance on such
forward-looking statements.
General
Trio-Tech
International was incorporated in 1958 under the laws of the State
of California. As used herein, the term "Trio-Tech" or
"Company” or “we” or “us” or
“Registrant” includes Trio-Tech International and its
subsidiaries unless the context otherwise indicates. The mailing
address and executive offices are located at Block 1008 Toa Payoh
North, Unit 03-09 Singapore 318996, Singapore, and the telephone
number is (65) 6265-3300.
We make
available through our website, free of charge, our Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, proxy statements and any amendments to those reports or
statements filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as soon as reasonably
practicable after they are electronically filed with or furnished
to the SEC. The SEC also maintains an internet site at www.sec.gov
that contains such reports and statements filed electronically with
the SEC by the Company. Additional information about Trio-Tech is
available on our website at www. triotech.com.
During
the fiscal year ended June 30, 2021, the Company operated its
business in four segments: manufacturing, testing services,
distribution and real estate. Geographically, the Company operates
in the United States (“U.S.”), Singapore, Malaysia,
Thailand and China. It operates six testing service facilities: one
in the U.S. and five in Asia. It operates two manufacturing
facilities: one in the U.S. and the other in Asia. Its real estate
segment operates in Asia and its distribution segment operates
primarily in Asia. Its major customers are concentrated in Asia and
they are either semiconductor chip manufacturers or testing
facilities that purchase testing equipment. For information
relating to revenues, profit and loss and total assets for each of
the segments, see Note 18 - Business Segments contained in the
consolidated financial statements included in this Form
10-K.
-1-
Company History – Certain Highlights for the Five Fiscal
Years Ended June 30, 2021
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2017
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Trio-Tech
International Pte. Ltd., Singapore, recertified to biz SAFE Level 3
Workplace Safety and Health standards.
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2018
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Trio-Tech
(Tianjin) Co. Ltd. recertified to ISO 9001:2015 standards. (Apr
2018).
Trio-Tech
International Pte. Ltd. (Singapore) recertified to ISO 9001:2015
standards. (Jun 2018)
Trio-Tech
(Malaysia) Sdn. Bhd. recertified to ISO 9001:2015 standards. (Jun
2018)
Trio-Tech
(Bangkok) Co. Ltd. recertified to ISO 9001:2015 standards. (Jun
2018)
Trio-Tech
International Pte. Ltd. (Singapore) recertified to ISO 14001:2015
standards. (Jun 2018)
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2019
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Trio-Tech
(Tianjin) Co. Ltd. recertified to ISO 14001:2015 standards. (Jul
2019)
Trio-Tech
(Tianjin) Co. Ltd. recertified to OHSAS 18001:2007 standards. (Jul
2019)
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2020
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Trio-Tech
International certified to ISO 9001:2005 standards. (March
2020)
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2021
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Trio-Tech
(Tianjin) Co. Ltd. recertified to ISO 9001:2015 standards. (Mar
2021)
Trio-Tech
(Tianjin) Co. Ltd. recertified to ISO 14001:2015 standards. (Mar
2021)
Trio-Tech
(Tianjin) Co. Ltd. certified to ISO 45001:2018 standards. (Mar
2021)
Trio-Tech
International Pte. Ltd. (Singapore) recertified to ISO 9001:2015
standards. (July 2021)
Trio-Tech
International Pte. Ltd. (Singapore) recertified to ISO 14001:2015
standards. (July 2021)
Trio-Tech
(Malaysia) Sdn. Bhd. recertified to ISO 9001:2015 standards. (July
2021)
Trio-Tech
(Malaysia) Sdn. Bhd. recertified to ISO 14001:2015 standards. (July
2021)
Trio-Tech
(Bangkok) Co. Ltd. recertified to ISO 9001:2015 standards. (July
2021)
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Overall Business Strategies
Our
core business is and historically has been in the semiconductor
industry (testing services, manufacturing-assembly) manufacturing
and distribution. Revenue from the semiconductor industry accounted
for 99.9% and 99.8% of our total revenue for fiscal years 2021 and
2020 respectively. The semiconductor industry has experienced
periods of rapid growth, but has also experienced downturns, often
in connection with, or in anticipation of, maturing product cycles
of both semiconductor companies’ and their customers’
products and declines in general economic conditions. To reduce our
risks associated with sole industry focus and customer
concentration, the Company continues to put effort into expanding
its line of businesses. The Real Estate segment contributed only
0.1% and 0.2% to the total revenue for fiscal 2021 and 2020
respectively and has been an insignificant business operation since
the property market in China has slowed down due to control
measures in China to cool surging property prices.
To
achieve our strategic plan for our semiconductor business, we
believe that we must pursue and win new business in the following
areas:
●
Primary markets – Capturing
additional market share within our primary markets by offering
superior products and services to address the needs of our major
customers.
●
Growing markets – Expanding our
geographic reach in areas of the world with significant growth
potential.
●
New markets
– Developing new products and
technologies that serve wholly new markets.
●
Complementary strategic relationships
– Through complementary acquisitions or
similar arrangements, we believe we can expand our markets and
strengthen our competitive position. As part of our growth
strategy, the Company continues to selectively assess opportunities
to develop strategic relationships, including acquisitions,
investments and joint development projects with key partners and
other businesses.
-2-
Business Segments
Testing Services
Our
testing services are rendered to manufacturers and purchasers of
semiconductors and other entities who either lack testing
capabilities or whose in-house screening facilities are
insufficient for testing devices in order for them to make sure
that these products meet certain commercial specifications.
Customers outsource their test services either to accommodate
fluctuations in output or to benefit from economies that can be
offered by third party service providers.
Our
laboratories perform a variety of tests, including stabilization
bake, thermal shock, temperature cycling, mechanical shock,
constant acceleration, gross and fine leak tests, electrical
testing, microprocessor equipment contract cleaning services,
static and dynamic burn-in tests, reliability lab services and
vibration testing. We also perform qualification testing,
consisting of intense tests conducted on small samples of output
from manufacturers who require qualification of their processes and
devices.
We use
our own proprietary equipment for certain burn-in, centrifugal and
leak tests, and commercially available equipment for various other
environmental tests. We conduct the majority of our testing
operations in Asia with facilities in Singapore, Malaysia, Thailand
and China, which have been certified to the relevant ISO quality
management standards.
Manufacturing
We
manufacture both front-end and back-end semiconductor test
equipment and related peripherals at our facilities in Singapore
and the U.S.
Front-End Products
Artic Temperature Controlled Wafer Chucks
Artic
Temperature Controlled Wafer Chucks are used for test,
characterization and failure analysis of semiconductor wafers and
such other components at accurately controlled cold and hot
temperatures. These systems provide excellent performance to meet
the most demanding customer applications. Several unique mechanical
design features provide excellent mechanical stability under high
probing forces and across temperature ranges.
Wet Process Stations
Wet
Process Stations are used for cleaning, rinsing and drying
semiconductor wafers, flat panel display magnetic disks, and other
microelectronic substrates. After the etching or deposition of
integrated circuits, wafers are typically sent through a series of
100 to 300 additional processing steps. At many of these processing
steps, the wafer is washed and dried using Wet Process
Stations.
Back-End Products
Autoclaves and HAST (Highly Accelerated Stress Test)
Equipment
We
manufacture autoclaves, HAST systems and specialized test fixtures.
Autoclaves provide pressurized, saturated vapor (100% relative
humidity) test environments for fast and easy monitoring of
integrated circuit manufacturing processes. HAST systems provide a
fast and cost-effective alternative to conventional non-pressurized
temperature and humidity testing.
Burn-in Equipment and Boards
We
manufacture burn-in systems, burn-in boards and burn-in board test
systems. Burn-in equipment is used to subject semiconductor devices
to elevate temperatures while testing them electrically to identify
early product failures and to assure long-term reliability. Burn-in
boards are used to mount devices during high temperature
environmental stressing tests.
We
provide integrated burn-in automation solutions to improve
products’ yield, reduce processing downtime and improve
efficiency. In addition, we develop a cooling solution, which is
used to cool or maintain the temperature of high power heat
dissipation semiconductor devices.
Component Centrifuges and Leak Detection Equipment
We
manufacture centrifuges that perform high speed constant
acceleration to test the mechanical integrity of ceramic and other
hermetically sealed semiconductor devices and electronic parts for
high reliability and aerospace applications. Leak detection
equipment is designed to detect leaks in hermetic packaging. The
bubble tester is used for gross leak detection. A visual bubble
trail will indicate when a device is defective.
-3-
Distribution
In
addition to marketing our proprietary products, we distribute
complementary products made by manufacturers mainly from the U.S.,
Europe, Taiwan, and Japan. The products include environmental
chambers, handlers, interface systems, vibration systems, shaker
systems, solderability testers and other semiconductor equipment.
Besides equipment, we also distribute a wide range of components
such as connectors, sockets, LCD display panels and touch-screen
panels. Furthermore, our range of products are mainly targeted for
industrial products, the life cycle of which can last from three
years to seven years, rather than consumer products which have a
shorter life cycle.
Real Estate
Beginning
in 2007, TTI invested in real estate property in Chongqing, China,
which has generated investment income from the rental revenue and
investment returns from deemed loan receivables, which are
classified as other income in the second quarter of fiscal 2015.
The rental income is generated from the rental properties in MaoYe
and FuLi in Chongqing, China.
Product Research and Development
We
focus our research and development activities on improving and
enhancing both product design and process technology. We conduct
product and system research and development activities for our
products in Singapore and the U.S. Research and development
expenses were $357 and $355 in fiscal years 2021 and 2020,
respectively.
Marketing, Distribution and Services
We
market our products and services worldwide, directly and through
independent sales representatives and our own marketing sales team.
We have approximately five independent sales representatives
operating in the U.S. and another twenty in various foreign
countries. All sales representatives represented the testing
services segment and the manufacturing segment for various products
and services produced and provided from our facilities in different
locations.
Dependence on Limited Number of Customers
In
fiscal years 2021 and 2020, combined sales of equipment and
services to our three largest customers accounted for approximately
55.5% and 60.3%, respectively, of our total net revenue. Of those
sales, $12,208 (37.7%) and $13,229 (38.4%) of our total net revenue
were from one major customer for fiscal years 2021 and 2020
respectively. Although the major customer is a U.S. company, the
revenue generated from it was from facilities located outside of
the U.S. The majority of our sales and services in fiscal years
2021 and 2020 were to customers outside of the U.S.
Backlog
The following table
sets forth the Company's backlog at the dates
indicated:
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For
the Year Ended
June
30,
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2021
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2020
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Manufacturing
backlog
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$5,040
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$5,010
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Testing services
backlog
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3,775
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2,915
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Distribution
backlog
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4,648
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1,409
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Real estate
backlog*
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40
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6
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$13,503
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$9,340
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*
Real estate backlog is based on the rental income from a
non-cancellable lease.
Based
on our past experience, we do not anticipate any significant
cancellations or renegotiation of sales. The purchase orders for
the manufacturing, testing services and distribution businesses
generally require delivery within 12 months from the date of the
purchase order and certain costs are incurred before delivery. In
the event of a cancellation of a confirmed purchase order, we
require our customers to reimburse us for all costs
incurred. We do not
anticipate any difficulties in meeting delivery schedules. For
testing services, the backlog is based on estimates provided by our
customers and is not based on a customer’s purchase order, as
it is a practice that the purchase orders are provided only during
the process of delivery.
Materials and Supplies
Our
products are designed by our engineers and are assembled and tested
at our facilities in the U.S., China and Singapore. We purchase all
parts and certain components from outside vendors for assembly
purposes. We have no written contracts with any of our key
suppliers. As these parts and components are available from a
variety of sources, we believe that the loss of any one of our
suppliers would not have a material adverse effect on our results
of operations taken as a whole.
-4-
Competition
Our
ability to compete depends on our ability to develop, introduce and
sell new products or enhanced versions of existing products on a
timely basis and at competitive prices, while reducing our
costs.
There
are numerous testing laboratories in the areas where we operate
that perform a range of testing services similar to those, we
offer. However, due to severe competition in the Asia testing
and burn-in services industry there has been a reduction in the
total number of competitors. The existence of competing
laboratories and the purchase of testing equipment by semiconductor
manufacturers and users are potential threats to our future testing
services revenue and earnings. Although these laboratories and
new competitors may challenge us at any time, we believe that other
factors, including reputation, long service history and strong
customer relationships, are instrumental in determining our
position in the market.
The
distribution segment sells a wide range of equipment to be used for
testing products. As the semiconductor equipment industry is highly
competitive, we offer a one-stop service alternative to customers
by complementing our products with design consultancy and other
value-added services.
The
principal competitive factors in the manufacturing industry include
product performance, reliability, service and technical support,
product improvements, price, established relationships with
customers and product familiarity. We make every effort to compete
favorably with respect to each of these factors. Although we
have competitors for our various products, we believe that our
products compete favorably with respect to each of the above
factors. We have been in business for more than 60 years and have
operation facilities mostly located in Asia. Those factors
combined have helped us to establish and nurture long-term
relationships with customers and will allow us to continue doing
business with our existing customers upon their relocation to other
regions where we have a local presence or are able to
reach.
Patents
In
fiscal years 2021 and 2020, we did not register any patents within
the U.S.
It is
typical in the semiconductor industry to receive notices from time
to time alleging infringement of patents or other intellectual
property rights of others. We do not believe that we infringe on
the intellectual property rights of any others. However, should any
claims be brought against us, the cost of litigating such claims
and any damages could materially and adversely affect our business,
financial condition, and results of operations.
Employees
As of
June 30, 2021, we had approximately 501 full time employees and no
part time employees. Geographically, approximately seven full time
employees were located in the U.S. and approximately 494 full time
employees in Asia. None of our employees are represented by a labor
union.
There
were approximately sixty-two employees in the manufacturing
segment, 404 employees in the testing services segment, four
employees in the distribution segment, three employees in the real
estate segment and twenty-eight employees in general
administration, logistics and others.
ITEM 1A – RISK FACTORS
As a
smaller reporting company as defined by Rule 12b-2 of the
Securities Exchange Act of 1934, we are not required to provide the
information required by this item.
Not
applicable.
-5-
ITEM 2 – PROPERTIES
As of
the date of filing of this Form 10-K, we believe that our existing
facilities are adequate and suitable to cover any sudden increase
in our needs in the foreseeable future.
The
following table presents the relevant information regarding the
location and general character of our principal manufacturing and
testing facilities:
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Location
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Segment
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Approx. Sq. Ft.
Occupied
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Owned
(O) or Leased (L)
&
Expiration Date
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16139 Wyandotte Street, Van Nuys,
CA 91406,
United States of America
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Corporate, Testing Services / Manufacturing
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5,200
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(L) Mar 2023
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1004, Toa Payoh North, Singapore
Unit No. HEX 07-01/07
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Testing Services
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6,864
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(L) Sep 2025
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Unit No. HEX 07-01/07, (ancillary site)
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Testing Services
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2,532
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(L) Sep 2025
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Unit No. HEX 03-01/02/03
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Testing Services / Manufacturing
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2,959
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(L) Sep 2025
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Unit No. HEX 01-08/15
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Testing Services / Manufacturing / Logistics Store
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6,864
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(L) Jan 2023
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Unit No. HEX 01-08/15, (ancillary site)
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Testing Services / Manufacturing
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449
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(L) Jan 2023
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Unit No. HEX 07-10/11
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Testing Services / Manufacturing
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1,953
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(L) Dec 2021
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1008, Toa Payoh North, Singapore
Unit No. HEX 03-09/17
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Manufacturing
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6,099
|
(L) Jan 2023
|
|
|
Unit No. HEX 03-09/17, (ancillary site)
|
Manufacturing
|
70
|
(L) Jan 2023
|
|
|
Unit No. HEX 01-09/10/11
|
Manufacturing
|
2,202
|
(L) Nov 2023
|
|
|
Unit No. HEX 01-15/16
|
Manufacturing
|
1,400
|
(L) Sep 2023
|
|
|
Unit No. HEX 01-08
|
Manufacturing
|
603
|
(L) Sep 2023
|
|
|
Unit No. HEX 01-12/14
|
Manufacturing
|
1,664
|
(L) Jul 2022
|
|
|
Lot No. 11A, Jalan SS8/2,
Sungai Way Free Industrial Zone,
47300 Petaling Jaya,
Selangor Darul Ehsan, Malaysia
|
Testing Services
|
78,706
|
(O)
|
|
|
4809-3-35,CBD Perdana 2
Persiaran Flora Cyber 12
63000 Cyberjaya
|
Manufacturing
|
2000
|
(L) May 2022
|
|
|
327, Chalongkrung Road,
Lamplathew, Lat Krabang,
Bangkok 10520, Thailand
|
Testing Services
|
34,433
|
(O)
|
|
|
No. 5, Xing Han Street, Block A
#04-15/16, Suzhou Industrial Park
China 215021
|
Testing Services
|
6,200
|
(L) Jan 2022
|
|
|
27-05, Huang Jin Fu Pan.
No. 26 Huang Jin Qiao Street
Hechuan District Chongqing
China 401520
|
Real Estate
|
969
|
(L) Aug 2023
|
|
|
B7-2, Xiqing Economic Development Area International Industrial
Park
Tianjin City, China 300385
|
Testing Services
|
45,940
|
(L) April 2026
|
|
-6-
ITEM 3 – LEGAL PROCEEDINGS
The
Company is, from time to time, the subject of litigation claims and
assessments arising out of matters occurring in its normal business
operations. In the opinion of management, resolution of these
matters will not have a material adverse effect on our consolidated
financial statements.
There
are no material proceedings to which any director, officer or
affiliate of the Company, any beneficial owner of more than five
percent of the Company’s Common Stock, or any associate of
such person, is a party that is adverse to the Company or its
properties.
ITEM 4 – MINE SAFETY DISCLOSURES
Not
applicable.
-7-
PART II
ITEM 5 – MARKET FOR REGISTRANT'S COMMON EQUITY,
RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our
Common Stock is traded on the NYSE American exchange under the
symbol “TRT.”
As of
September 1, 2021, there were 3,913,055 shares of our Common Stock
issued and outstanding, and the Company had approximately fifty six
record holders of Common Stock. The number of holders of record
does not include the number of persons whose stock is in nominee or
“street name” accounts through brokers.
Dividend Policy
We did
not declare any cash dividends in either fiscal year 2021 or fiscal
year 2020.
The
determination as to whether to pay any future cash dividends will
depend upon our earnings and financial position at that time and
other factors as the Board of Directors may deem appropriate. In
general, California law prohibits the payment of dividends unless
the corporation’s retained earnings prior to the dividend
equals or exceeds the dividend or, immediately after payment of the
dividends, the corporation’s assets would equal or exceed its
total liabilities. There is no assurance that dividends will be
paid to holders of Common Stock in the foreseeable
future.
ITEM 6 - [RESERVED]
-8-
ITEM 7 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (IN THOUSANDS, EXCEPT
PERCENTAGES AND SHARE AMOUNTS)
The following discussion and analysis should be read in conjunction
with our disclaimer on “Forward-Looking Statements,”
“Item 1. Business,” and our Consolidated Financial
Statements, the notes to those statements and other financial
information contained elsewhere in this Annual Report on
Form 10-K.
During
fiscal years 2021 and 2020, Trio-Tech International operated in
four segments: manufacturing, testing services, distribution, and
real estate. In fiscal year 2021, revenue from the manufacturing,
testing services, distribution and real estate segments represented
40.5%, 42.7%, 16.7% and 0.1% of our revenue, respectively, as
compared to 33.7%, 43.0%, 23.1% and 0.2%, respectively, in fiscal
year 2020.
Semiconductor testing and manufacturing (assembly) of test
equipment is our core business. We provide third-party semiconductor testing and
burn-in services primarily through our laboratories in Asia. At or
from our facilities in the U.S. and Asia, we also design,
manufacture and market equipment and systems to be used in the
testing and production of semiconductors and distribute
semiconductor processing and testing equipment manufactured by
other vendors.
Our
distribution segment operates primarily in Asia. This segment
markets and supports distributing complementary products supplied
by other manufacturers that are used by its customers and other
semiconductor and electronics manufacturers. We believe this will
help us to reduce our exposure to multiple risks arising from being
a mere distributor of manufactured products from
others.
The
main revenue component for the real estate segment was rental
income.
No
other investment income was recorded as “revenue” by
the real estate segment in either of fiscal years 2021 or
2020.
The
rental income is generated from the rental properties acquired from
MaoYe Property Ltd. (“MaoYe”) and Chongqing FuLi Real
Estate Development Co. Ltd (“FuLi”) in Chongqing,
China. In the second quarter of fiscal 2015, the investment made
with JiaSheng Property Development Co. Ltd
(“JiaSheng”), which was deemed as loans receivable, was
transferred to down payment for purchase of investment property in
China.
Trio-Tech
Chongqing Co., Ltd. (“TTCQ”) invested RMB 5,554 in
rental properties in MaoYe during fiscal year 2008, RMB 3,600 in
rental properties from JiangHuai Property Development Co. Ltd.
(“JiangHuai”) during fiscal year 2010 and RMB 4,025 in
rental properties in FuLi during fiscal year 2010. During fiscal
year 2019, TTCQ completed the sale of thirteen of the fifteen units
constituting the MaoYe property, which contributed a capital gain
of $685. The total investment in properties in China was RMB 9,649,
in fiscal year 2021 and 2020, approximately $1,493 and $1,363
respectively. The carrying value of these investment properties in
China was RMB 4,402 and RMB 4,884, or approximately $681 and $690,
in fiscal years 2021 and 2020, respectively. These properties
generated a total rental income of $28 and $62 for fiscal years
2021 and 2020, respectively. TTCQ’s investment in properties
that generated rental income is discussed further in this Form
10-K.
TTCQ
has yet to receive the title deed for properties purchased from
JiangHuai. TTCQ was in the legal process of obtaining the title
deed until the developer encountered cash flow difficulties in
recent years. Since then, JiangHuai company is under liquidation
and is now undergoing asset distribution. The JiangHuai property
did not generate any income during fiscal 2021 or
2020.
On
October 14, 2014, TTCQ and Jun Zhou Zhi Ye entered into a
memorandum of understanding. Based on the memorandum of
understanding, both parties agreed to register a sales and purchase
agreement upon Jun Zhou Zhi Ye obtaining a license to sell the
commercial property (the Singapore Themed Resort Project) located
in Chongqing, China. The proposed agreement is for the sale of shop
lots with a total area of 1,484.55 square meters as consideration
for the outstanding amounts owed to TTCQ by Jun Zhou Zhi Ye as
follows:
a)
Long-term loan receivable RMB 5,000, or approximately $773, as
disclosed in Note 6, plus the interest receivable on the long-term
loan receivable of RMB 1,250;
b)
Commercial units measuring 668 square meters and
c) RMB
5,900 as part of the unrecognized cash consideration of RMB 8,000
relating to the disposal of the joint venture.
These
considerations do not include the remaining outstanding amount of
RMB 2,000, or approximately $309, which will be paid to TTCQ in
cash.
The
shop lots are to be delivered to TTCQ upon completion of the
construction of the shop lots in the Singapore Themed Resort
Project. The initial targeted date of completion was December 31,
2016. Based on discussions with the developer, the completion date
is estimated to be December 31, 2022. The delay was primarily due
to the time needed by the developer to work with various parties to
inject sufficient funds into this project, especially during the
COVID-19 pandemic. Based on the available information, the
developer had applied for asset reorganization and this application
is currently pending for further approvals by the local government
departments.
The
Company recorded a one-time, non-cash impairment charge of $1,580
in the fourth quarter of fiscal 2021 related to the doubtful
recovery of a down payment on shop lots in the Singapore Theme
Resort Project in Chongqing, China. We elected to take this
non-cash impairment charge because of increased uncertainties
regarding the project’s viability given the developers
weakening financial condition as well as uncertainties arising from
the negative real-estate environment in China, implementation of
control measures on real-estate lending and its relevant government
policies, together with effects of the ongoing
pandemic.
-9-
Fiscal Year 2021
Highlights (in Thousands)
●
Total revenue
decreased by $2,003, or 5.8%, to $32,462 in fiscal year 2021
compared to $34,465 in fiscal year 2020.
●
Manufacturing
segment revenue increased by $1,546, or 13.3%, to $13,151 in fiscal
year 2021 compared to $11,605 in fiscal year 2020.
●
Testing services
segment revenue was $13,846 in fiscal year 2021, a decrease of
$994, or 6.7%, compared to $14,840 in fiscal year
2020.
●
Distribution
segment revenue was $5,437 in fiscal year 2021, a decrease of
$2,521, or 31.7%, compared to $7,958 in fiscal year
2020.
●
Real estate segment
revenue decreased by $34 to $28 in fiscal year 2021 compared to $62
in fiscal year 2020.
●
Overall gross
profit margin increased by 2.5% to 23.6% in fiscal year 2021
compared to 21.1% in fiscal year 2020.
●
General and
administrative expenses decreased by $126 to $6,938 in fiscal year
2021 compared to $7,064 in fiscal year 2020
(restated).
●
Selling expenses
decreased by $233, or 34.3%, to $446 for fiscal year 2021 compared
to $679 in fiscal year 2020.
●
Loss from
operations was $70 in fiscal year 2021, a decrease of $877 as
compared to loss from operations of $947 in fiscal year
2020.
●
An
impairment loss on other assets of $1,580 recorded for fiscal year
2021 arise from the doubtful recovery of down payment made to Jun
Zhou Zhi Ye for the shop lots in the Singapore Themed Resort
Project located in Chongqing, China.
●
The net other
income increased by $29 to $363 in fiscal year 2021 compared to
$334 in fiscal year 2020.
●
Loss from
continuing operations before income taxes was $899 in fiscal year
2021, a decrease of $2,001, as compared to income from continuing
operations of $1,107 in fiscal year 2020.(restated)
●
Net loss
attributable to Trio-Tech International for fiscal year 2021 was
$591 compared to net income of $878 in fiscal year 2020
(restated).
●
Net loss
attributable to noncontrolling interest for fiscal year 2021 was
$564 compared to net income of $238 in fiscal year
2020.
●
Working capital
increased by $2,243, or 17.3%, to $15,200 as of June 30, 2021
compared to $12,957 as of June 30, 2020 (restated).
The
highlights above are intended to identify some of our most
significant events and transactions during our fiscal year 2021.
However, these highlights are not intended to be a full discussion
of our results for the year. These highlights should be read in
conjunction with the discussion on these items in Item 7 and with
our consolidated financial statements and footnotes accompanying
this Annual Report.
General Financial Information
During
the fiscal year ended June 30, 2021, total assets increased by
$2,646 from $38,306 in fiscal year 2020 to $39,886 in fiscal year
2021. The increase was primarily due to an increase in cash and
cash equivalents, trade account receivables, inventories, prepaid
expenses and other current assets, operating lease right-of-use
assets, financed sales receivable and restricted term deposits. The
increase was partially offset by the decrease in short term
deposits, other receivables, other assets, deferred tax assets,
investment properties and property, plant and
equipment.
Cash
and cash equivalents at June 30, 2021, were $5,836, an increase of
$1,686, or 40.6%, compared to $4,150 at June 30, 2020, primarily
due to the cash inflow generated from the operating
activities.
Trade
account receivables at June 30, 2021, was $8,293, representing an
increase of $2,342, or 39.4%, compared to $5,951 at June 30, 2020.
The increase was attributable to an increase in the overall sales
for the fourth quarter of fiscal year 2021 compared to the same
period in the last fiscal year. The number of days’ sales
outstanding in account receivables was 79 days and 68 days for the
fiscal years ended June 30, 2021, and 2020,
respectively.
As at
June 30, 2021, other receivables were $662, a decrease of $336, or
33.7%, compared to $998 at June 30, 2020. The decrease was
primarily due to a decrease in advance payment to vendors and
government grant receivables in the Singapore
operations.
Inventories
at June 30, 2021, were $2,080, an increase of $158, or 8.2%,
compared to $1,922 at June 30, 2020. The increase in inventories
was mainly due to the delay requested by one customer for further
enhancement. The number of days’ inventory held was 73 days
at the end of fiscal 2021, compared to 88 days at the end of fiscal
year 2020.
Investment
properties in China as of June 30, 2021, were $681, a decrease of
$9 from $690 at June 30, 2020. The decrease was attributable
to the depreciation charged for the year.
Property,
plant and equipment at June 30, 2021, were $9,531, a decrease of
$779 compared to $10,310 at June 30, 2020. This was mainly due to
depreciation charged for the year and the foreign currency exchange
movement between fiscal year 2021 and 2020. The decrease was
partially offset by the new acquisition of property, plant and
equipment in the Singapore, Malaysia, China and Thailand
operations.
Other
assets at June 30, 2021, were $262, a decrease of $1,347, or 84%,
compared to $1,609 at June 30, 2020. The decrease in other assets was
primarily due to the impairment provision for down payment made to
Jun Zhou Zhi Ye for the shop lots in the Singapore Themed Resort
Project located in Chongqing, China.
Financed
sales receivable at June 30, 2021, was $58 arose from a sales-type
lease contract entered by the China operation.
Restricted
term deposits at June 30, 2021 were $1,741, compared to $1,660 at
June 30, 2020. The increase was mainly due to the currency
translation difference between functional currency and U.S.
dollars from June 30,
2020 to June 30, 2021.
-10-
Total
liabilities at June 30, 2021, were $12,253, an increase of $1,739,
or 16.5%, compared to $10,514 at June 30, 2020. The increase in
liabilities was primarily due to the increase in accounts payable,
accrued expenses and operating leases, but partially offset by the
decrease in lines of credit, income taxes payable, bank loans
payable, finance lease, PPP loan and other non-current
liabilities.
Accounts
payable as of June 30, 2021, increased by $1,112, or 42.9% to
$3,702 from $2,590 as of June 30, 2020. The increase was mainly due
to the increase in purchases in the Singapore operations to meet
the increase of customer demand.
Accrued
expenses as at June 30, 2021, increased by $358, or 11.9% to $3,363
from $3,005 as at June 30, 2020. The increase was mainly due to an
increase in accrued payroll liability in the Singapore and China
operations.
Income
tax payable as at June 30, 2021, decreased by $75 to $699 from $774
as at June 30, 2020. The decrease was mainly due to the repayment
made for the Repatriation Tax that arose from the introduction of
the Tax Cuts & Jobs Act 2017 in fiscal year 2021.
Bank
loans payable decreased by $146 to $2,060 as at June 30, 2021, as
compared to $2,206 as at June 30, 2020. This was due to the
repayments made in the Malaysia operation.
Finance
leases decreased by $216 to $450 as at June 30, 2021, as compared
to $666 as at June 30, 2020. This was due to the repayments made in
the Singapore and Malaysia operations.
Operating
lease right-of-use assets and the corresponding lease liabilities
increased by $932 to $1,876 as of June 30, 2021, as compared to
$944 as at June 30, 2020. This was due to the renewal of the lease
agreements in the Singapore and China Operations. The increase was
partially offset with the repayment made and the operating lease
expenses charged for the period.
As of
June 30, 2021, the Company received the loan forgiveness for the
Paycheck Protection Program (PPP) of $121, which was created by the
United States Coronavirus Aid, Relief, and Economic Security
(CARES) Act.
Impact of COVID-19 on our Business
In
December 2019, a novel strain of coronavirus
(“COVID-19”), was reported to have surfaced in China,
resulting in shutdowns of manufacturing and commerce in the months
that followed. Since then, the COVID-19 pandemic has spread to
multiple countries worldwide and has resulted in authorities
implementing numerous measures to try to contain the disease and
slow its spread, such as travel bans and restrictions, quarantines,
shelter-in-place orders and shutdowns. These measures have created
significant uncertainty and economic disruption, both short-term
and potentially long-term.
The
health and safety of our employees and our customers are a top
priority for us. In an effort to protect our employees, we took and
continue to take proactive and aggressive actions, starting with
the earliest signs of the outbreak, to adopt social distancing
policies at our locations, including working from home and
suspending employee travel. Our operations have been classified as
part of the global supply chain and essential businesses in many
jurisdictions, and employees who are working on-site are required
to adhere to strict safety measures, including the use of masks and
sanitizer, wellness screenings prior to accessing work sites,
staggered break times to prevent congregation, prohibitions on
physical contact with coworkers or customers, restrictions on
access through only a single point of entry and exit and utilizing
video conferencing. We have also incorporated other rules such as
restricting visitors to any of our facilities that remain open and
proactively providing employees with hand sanitizer.
The
most significant near-term impacts of the ongoing COVID-19 pandemic
on our financial performance are declines in customers’
revenue in our distribution segment in this fiscal year, as
compared to the prior fiscal year. However, we are seeing a
recovery in customers’ forecast, which were previously
impacted by the supply chain disruption and resulted in the delay
in deliveries. In addition, we are seeing an improvement in the
manufacturing and testing segments’ financial performance
beginning with the second and fourth quarter of fiscal year 2021,
respectively.
The
Company received government assistance amounting to $401 in the
Singapore and Malaysia operations to mitigate the adverse impact on
the business from the pandemic in fiscal year 2021. In fiscal year
2020, the Company also received a PPP loan of $121 in the U.S.
operation to support the business amid the pandemic, for which the
Company received the full loan forgiveness in fiscal year
2021.
As of
June 30, 2021, the Company had cash and cash equivalents and
short-term deposits totaling $12,487 and an unused line of credit
of $5,641. We finance operations primarily through our existing
cash balances, cash collected from operations, bank borrowings and
capital lease financing. We believe these sources are sufficient to
fund our operations for the foreseeable future.
-11-
While we have implemented safeguards and procedures to counter the
impact of the COVID-19 pandemic, the full extent to which the
pandemic has and will directly or indirectly impact us, including
our business, financial condition, and result of operations, will
depend on future developments that are highly uncertain and cannot
be accurately predicted. The new variant of COVID-19 has resulted
in a surge of the number of Covid-19 cases worldwide. This may
require further mitigation efforts taken to contain the virus or
treat its impact and the economic impact on local, regional,
national and international markets despite a few countries that had
loosened their restriction policies. We will continue to actively
monitor the situation and may take further actions that alter our
business operations as may be required by the governments or that
we determine are in the best interests of our employees, customers,
suppliers and stockholders.
Critical Accounting Estimates & Policies
The
discussion and analysis of the Company’s financial condition
presented in this section are based upon our consolidated financial
statements, which have been prepared in accordance with generally
accepted accounting principles in the U.S. During the preparation
of the consolidated financial statements, we are required to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenue and expenses, and related disclosure of
contingent assets and liabilities. On an ongoing basis, we evaluate
our estimates and judgments, including those related to sales,
returns, pricing concessions, bad debts, inventories, investments,
fixed assets, intangible assets, income taxes and other
contingencies. Due to the COVID-19 pandemic, there has been
uncertainty and disruption in the global economy and financial
markets. These estimates and assumptions may change as new events
occur and additional information is obtained. Actual results may
differ from these estimates under different assumptions or
conditions.
In response to the SEC’s Release No.
33-8040, Cautionary Advice Regarding
Disclosure about Critical Accounting Policy, we have identified the most critical accounting
policies upon which our financial status depends. We determined that
those critical accounting policies are related to the inventory
valuation; allowance for doubtful accounts; revenue recognition;
impairment of property, plant and equipment; investment properties
and income tax. These accounting policies are discussed in the
relevant sections in this management’s discussion and
analysis, including the Recently Issued Accounting Pronouncements
discussed below.
Account Receivables and Allowance for Doubtful
Accounts
During
the normal course of business, we extend unsecured credit to our
customers in all segments. Typically, credit terms require payment
to be made between 30 to 90 days from the date of the sale. We
generally do not require collateral from customers. We maintain our
cash accounts at credit-worthy financial institutions.
The
Company’s management considers the following factors when
determining the collectability of specific customer accounts:
customer creditworthiness, past transaction history with the
customer, current economic industry trends, and changes in customer
payment terms. The Company includes any account balances that are
determined to be uncollectible, along with a general reserve, in
the overall allowance for doubtful accounts. After all attempts to
collect a receivable have failed, the receivable is written off
against the allowance. Based on the information available to
management, the Company believed that its allowance for doubtful
accounts was adequate as of June 30, 2021.
Inventory Valuation
Inventories of our manufacturing and distribution segments,
consisting principally of raw materials, works in progress, and
finished goods, are stated at the lower of cost, using the
first-in, first-out (“FIFO”) method, or market value.
The semiconductor industry is characterized by rapid technological
change, short-term customer commitments and swiftly changing
demand. Provisions for estimated excess and obsolete inventory are
based on regular reviews of inventory quantities on hand and the
latest forecasts of product demand and production requirements from
our customers. Inventories are written down for not-saleable,
excess or obsolete raw materials, works-in-process and finished
goods by charging such write-downs to cost of sales. In addition to
write-downs based on newly introduced parts, statistics and
judgments are used for assessing provisions of the remaining
inventory based on salability and obsolescence.
Property, Plant and Equipment & Investment
Properties
Property, plant and equipment and investment properties are stated
at cost, less accumulated depreciation and amortization.
Depreciation is provided for over the estimated useful lives of the
assets using the straight-line method. Amortization of leasehold
improvements is provided for over the lease terms or the estimated
useful lives of the assets, whichever is shorter, using the
straight-line method.
Maintenance, repairs and minor renewals are charged directly to
expense as incurred. Additions and improvements to property and
equipment are capitalized. When assets are disposed of, the related
cost and accumulated depreciation thereon are removed from the
accounts and any resulting gain or loss is included in the
consolidated statements of operations and comprehensive income or
loss.
-12-
Foreign Currency Translation and Transactions
The United States dollar (“U.S. dollar”) is the
functional currency of the U.S. parent company. The Singapore
dollar, the national currency of Singapore, is the primary currency
of the economic environment in which the operations in Singapore
are conducted. We also have business entities in Malaysia,
Thailand, China and Indonesia, of which the Malaysian ringgit
(“RM”), Thai baht, Chinese renminbi (“RMB”)
and Indonesian rupiah, are the national currencies. The Company
uses the U.S. dollar for financial reporting purposes.
The Company translates assets and liabilities of its subsidiaries
outside the U.S. into U.S. dollars using the rate of exchange
prevailing at the balance sheet date, and the statement of
operations is measured using average rates in effect for the
reporting period. Adjustments resulting from the translation of the
subsidiaries’ financial statements from foreign currencies
into U.S. dollars are recorded in shareholders' equity as part of
accumulated comprehensive income or loss translation adjustment.
Gains or losses resulting from transactions denominated in
currencies other than functional currencies of the Company’s
subsidiaries are reflected in income for the reporting
period.
Revenue Recognition
The Company adopted Accounting Standards Update (“ASU”)
No. 2014-09, ASC Topic 606, Revenue from Contracts with
Customers (“ASC Topic
606”). This standard outlines a single comprehensive model
for entities to use in accounting for revenue arising from
contracts with customers.
We apply a five-step approach as defined in ASC Topic 606 in
determining the amount and timing of revenue to be recognized: (1)
identifying the contract with customer; (2) identifying the
performance obligations in the contracts; (3) determining the
transaction price; (4) allocating the transaction price to the
performance obligations in the contract; and (5) recognizing
revenue when the corresponding performance obligation is
satisfied.
Revenue derived from testing services is recognized when testing
services are rendered. Revenue generated from sale of products in
the manufacturing and distribution segments are recognized when
persuasive evidence of an arrangement exists, delivery of the
products has occurred, customer acceptance has been obtained (which
means the significant risks and rewards of ownership have been
transferred to the customer), the price is fixed or determinable
and collectability is reasonably assured. Certain customers can
request for installation and training services to be performed for
certain products sold in the manufacturing segment. These services
are mainly for helping customers with the test runs of the machines
sold and are considered a separate performance obligation. Such
services can be provided by other entities as well, and these do
not significantly modify the product. The Company recognizes the
revenue at the point in time when the Company has satisfied its
performance obligation.
In the real estate segment: (1) revenue from property development
is earned and recognized on the earlier of the dates when the
underlying property is sold or upon the maturity of the agreement;
if this amount is uncollectible, the agreement empowers the
repossession of the property, and (2) rental revenue is recognized
on a straight-line basis over the terms of the respective leases.
This means that, with respect to a particular lease, actual amounts
billed in accordance with the lease during any given period may be
higher or lower than the amount of rental revenue recognized for
the period. Straight-line rental revenue is commenced when the
tenant assumes possession of the leased premises. Accrued
straight-line rents receivable represents the amount by which
straight-line rental revenue exceeds rents currently billed in
accordance with lease agreements.
Investment
The Company (a) evaluates the sufficiency of the total equity at
risk, (b) reviews the voting rights and decision-making authority
of the equity investment holders as a group, and whether there are
any guaranteed returns, protection against losses, or capping of
residual returns within the group and (c) establishes whether
activities within the venture are on behalf of an investor with
disproportionately few voting rights in making this VIE
determination. The Company would consolidate a venture that is
determined to be a VIE if it was the primary beneficiary. Beginning
January 1, 2010, a new accounting standard became effective and
changed the method by which the primary beneficiary of a VIE is
determined. Through a primarily qualitative approach, the variable
interest holder, if any, who has the power to direct the
VIE’s most significant activities is the primary beneficiary.
To the extent that the investment does not qualify as VIE, the
Company further assesses the existence of a controlling financial
interest under a voting interest model to determine whether the
venture should be consolidated.
-13-
Equity Method
The Company analyzes its investments in joint ventures to determine
if the joint venture should be accounted for using the equity
method. Management evaluates both Common Stock and in-substance
Common Stock as to whether they give the Company the ability to
exercise significant influence over operating and financial
policies of the joint venture even though the Company holds less
than 50% of the Common Stock and in-substance Common Stock. If so,
the net income of the joint venture will be reported as
“Equity in earnings of unconsolidated joint ventures, net of
tax” in the Company’s consolidated statements of
operations and comprehensive income or loss.
Cost Method
Investee
companies not accounted for under the consolidation or the equity
method of accounting are accounted for under the cost method of
accounting. Under this method, the Company’s share of the
earnings or losses of such investee companies is not included in
the consolidated balance sheet or consolidated statements of
operations and comprehensive income or loss. However, impairment
charges are recognized in the consolidated statements of operations
and comprehensive income or loss. If circumstances suggest that the
value of the investee company has subsequently recovered, such
recovery is not recorded.
Long-Lived Assets & Impairment
Our business requires heavy investment in manufacturing facilities
and equipment that are technologically advanced but can quickly
become significantly underutilized or rendered obsolete by rapid
changes in demand. We have recorded intangible assets with finite
lives related to our acquisitions.
We evaluate our long-lived assets with finite lives for impairment
whenever events or changes in circumstances indicate that the
carrying value of such assets may not be recoverable. Factors
considered important that could result in an impairment review
include significant underperformance relative to expected
historical or projected future operating results, significant
changes in the manner of use of the assets or the strategy for our
business, significant negative industry or economic trends, and a
significant decline in our stock price for a sustained period of
time. Impairment is recognized based on the difference between the
fair value of the asset and its carrying value, and fair value is
generally measured based on discounted cash flow analysis, if there
is significant adverse change.
While
we have not identified any changes in circumstances requiring
further impairment test in fiscal year 2021 other than the
circumstances related to the Singapore Theme Resort Project, we
will continue to monitor impairment indicators, such as disposition
activity, stock price declines or changes in forecasted cash flows
in future periods. If the fair value of our reporting unit declines
below the carrying value in the future, we may incur additional
impairment charges.
During
the third quarter of 2020, our operation in China provided
impairment loss of $139 for seven pieces of equipment because one
of our customers’ products came to the end of its product
burn-in cycle earlier than expected. The cost of converting the
seven pieces of equipment outweighed the benefit of utilizing said
equipment. Operations did not foresee any future usage of these
assets. There will be no future economic cash inflow generated from
these assets. Based on these events, we concluded that it was more
likely than not that value-in-use of these assets was less than
their carrying value. Full impairment of these assets has been
recorded.
During the fourth quarter of 2021, The Company recorded a
impairment charge of $1,580 related to the doubtful recovery of a
down payment on shop lots in the Singapore Theme Resort Project in
Chongqing, China. The Company elected to take this
non-cash impairment charge because of increased uncertainties
regarding the project’s viability given the developers
weakening financial condition as well as uncertainties arising from
the negative real-estate environment in China, implementation of
control measures on real-estate lending and its relevant government
policies, together with effects of the ongoing
pandemic.
Fair Value Measurements
Under the standard ASC Topic 820, Fair Value
Measurements and Disclosures
(“ASC Topic
820”), fair value refers to the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between participants in the market in which the
reporting entity transacts its business. ASC Topic 820 clarifies
the principle that fair value should be based on the assumptions
market participants would use when pricing the asset or liability.
In support of this principle, ASC Topic 820 establishes a fair
value hierarchy that prioritizes the information used to develop
those assumptions. Under the standard, fair value measurements
would be separately disclosed by level within the fair value
hierarchy.
Income Tax
We account for income taxes using the liability method in
accordance with the provisions of ASC Topic 740, Accounting for Income
Taxes (“ASC Topic 740”), which requires an entity to
recognize deferred tax liabilities and assets. Deferred tax assets
and liabilities are recognized for the future tax consequence
attributable to the difference between the tax bases of assets and
liabilities and their reported amounts in the financial statements,
which will result in taxable or deductible amounts in future years.
Further, the effects of enacted tax laws or rate changes are
included as part of deferred tax expenses or benefits in the period
that covers the enactment date. Management believed it was more
likely than not that the future benefits from these timing
differences would not be realized. Accordingly, a full allowance
was provided as of June 30, 2021, and 2020.
The calculation of tax liabilities involves dealing with
uncertainties in the application of complex global tax regulations.
We recognize potential liabilities for anticipated tax audit issues
in the U.S. and other tax jurisdictions based on our estimate of
whether, and the extent to which, additional taxes will be due. If
the estimate of tax liabilities proves to be less than the ultimate
assessment, a further charge to expense would result.
-14-
Stock-Based Compensation
We
calculate compensation expense related to stock option awards made
to employees and directors based on the fair value of stock-based
awards on the date of grant. We determine the grant date fair value
of our stock option awards using the Black-Scholes option pricing
model and for awards without performance condition the related
stock-based compensation is recognized over the period in which a
participant is required to provide service in exchange for the
stock-based award, which is generally four years. We recognize
stock-based compensation expense in the consolidated statements of
shareholders' equity based on awards ultimately expected to vest.
Forfeitures are estimated on the date of grant and revised if
actual or expected forfeiture activity differs materially from
original estimates.
Determining
the fair value of stock-based awards at the grant date requires
significant judgement. The determination of the grant date fair
value of stock-based awards using the Black-Scholes option-pricing
model is affected by our estimated common stock fair value as well
as other subjective assumptions including the expected term of the
awards, the expected volatility over the expected term of the
awards, expected dividend yield and risk-free interest rates. The
assumptions used in our option-pricing model represent
management’s best estimates and are as follows:
●
Fair
Value of Common Stock. We determined the fair value of each share
of underlying common stock based on the closing price of our common
stock on the date of grant.
●
Expected
Term. The expected term of employee stock options reflects the
period for which we believe the option will remain outstanding
based on historical experience and future
expectations.
●
Expected
Volatility. We base expected volatility on our historical
information over a similar expected term.
Noncontrolling Interests in Consolidated Financial
Statements
We adopted ASC Topic 810, Consolidation
(“ASC Topic 810”). This
guidance establishes accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation
of a subsidiary. This guidance requires that noncontrolling
interests in subsidiaries be reported in the equity section of the
controlling company’s balance sheet. It also changes the
manner in which the net income of the subsidiary is reported and
disclosed in the controlling company’s income
statement.
Loan Receivables
The loan receivables are classified as current assets carried at
face value and are individually evaluated for impairment. The
allowance for loan losses reflects management’s best estimate
of probable losses determined principally on the basis of
historical experience and specific allowances for known loan
accounts. All loans or portions thereof deemed to be uncollectible
or to require an excessive collection cost are written off to the
allowance for losses.
Interest Income
Interest income on loans is recognized on an accrual basis.
Discounts and premiums on loans are amortized to income using the
interest method over the remaining period to contractual maturity.
The amortization of discounts into income is discontinued on loans
that are contractually 90 days past due or when collection of
interest appears doubtful.
Recent Accounting Pronouncements
In
August 2020, the FASB issued ASU 2020-06: Debt – Debt with Conversion and Other
Options (Subtopic 470-20) and Derivative and Hedging –
Contracts in Entity’s Own Equity (Subtopic 815-40).
This ASU reduces the number of accounting models for convertible
debt instruments and convertible preferred stock, as well as amend
the guidance for the derivatives scope exception for contracts in
an entity’s own equity to reduce form-over-substance-based
accounting conclusions. In addition, this ASU improves and amends
the related EPS guidance. These amendments are effective for the
Company for fiscal years beginning after December 15, 2023,
including interim periods within those fiscal years. Early adoption
is permitted, but no earlier than fiscal years beginning after
December 15, 2020, including interim periods within those fiscal
years. Adoption is either a modified retrospective method or a
fully retrospective method of transition. The Company has completed
its assessment and concluded that this update has no significant
impact to the Company’s consolidated financial
statements.
In March 2020, FASB issued ASU 2020-04 ASC Topic 848:
Reference
Rate Reform: Facilitation of the Effects of Reference Rate Reform
on Financial Reporting, which
provides optional expedients and exceptions for applying U.S. GAAP
to contracts, hedging relationships and other transactions affected
by the discontinuation of the London Interbank Offered Rate
(“LIBOR”) or by another reference rate expected to be
discontinued. The amendments are effective for all entities as of
March 12, 2020, and the Company may elect to apply the amendments
prospectively through December 31, 2022. The Company has completed
its assessment and concluded that this update has no significant
impact to the Company’s consolidated financial
statements.
-15-
In June 2016, FASB issued ASU 2016-13 ASC Topic 326:
Financial
Instruments — Credit Losses (“ASC Topic 326”) for the measurement
of all expected credit losses for financial assets held at the
reporting date based on historical experience, current conditions,
and reasonable and supportable forecasts. Financial institutions
and other organizations will now use forward-looking information to
better inform their credit loss estimates. Many of the loss
estimation techniques applied today will still be permitted,
although the inputs to those techniques will change to reflect the
full amount of expected credit losses. ASC Topic 326 is effective
for the Company for annual periods beginning after December 15,
2022. The Company has completed its assessment and concluded that
this update has no significant impact to the Company’s
consolidated financial statements.
Other new pronouncements issued but not yet effective until after
June 30, 2021, are not expected to have a significant effect on the
Company’s consolidated financial position or results of
operations.
Comparison of Operating Results
The
following table presents certain data from the consolidated
statements of operating income as a percentage of net sales for the
fiscal years ended June 30, 2021, and 2020:
|
|
For
the Year Ended June 30,
|
|
|
|
2021
|
2020
(Restated)
|
|
Revenue
|
100.0%
|
100.0%
|
|
Cost of
sales
|
76.4
|
78.9
|
|
Gross
Margin
|
23.6%
|
21.1%
|
|
Operating
expenses:
|
|
|
|
General and
administrative
|
21.3%
|
20.5%
|
|
Selling
|
1.4
|
2.0
|
|
Research and
development
|
1.1
|
1.0
|
|
Impairment loss on
long-lived assets
|
-
|
0.4
|
|
Total operating
expenses
|
23.8%
|
23.9%
|
|
Loss
from Operations
|
(0.2)%
|
(2.7)%
|
Overall Revenue
The
overall revenue is composed of the revenues from the manufacturing,
testing services, distribution and real estate segments. The
following table presents the components of the overall revenue
realized in fiscal years 2021 and 2020 in percentage
format.
|
|
For
the Year Ended June 30,
|
|
|
|
2021
|
2020
|
|
Manufacturing
|
40.5%
|
33.7%
|
|
Testing
|
42.7
|
43.0
|
|
Distribution
|
16.7
|
23.1
|
|
Real
estate
|
0.1
|
0.2
|
|
Total
|
100.0%
|
100.0%
|
|
|
|
|
Revenue
in fiscal year 2021 was $32,462, a decrease of $2,003, or 5.8%,
compared to $34,465 in fiscal year 2020. The decrease in revenue
was due to a decrease in sales across all segments amid the
pandemic except the manufacturing segment.
As a
percentage of total revenue, the revenue generated by the
manufacturing segment in fiscal year 2021 accounted for 40.5%, an
increase of 6.8%, as compared to 33.7% in fiscal year 2020. In
terms of dollar amount, the revenue generated by the manufacturing
segment in fiscal year 2021 was $13,151, reflecting an increase of
$1,546, or 13.3%, compared to $11,605 in fiscal year 2020. The
increase in revenue generated by the manufacturing segment was due
to an increase in the manufacturing segment in the U.S. and
Singapore operations. Despite substantial headwinds caused by the
pandemic, the demand for our equipment was strong in this fiscal
year.
-16-
Backlog
in the manufacturing segment was $5,040 as of June 30, 2021,
representing an increase of $30 from $5,010 as of June 30, 2020. We
expect the demand for our products to increase at a slower pace in
fiscal year 2022 as compared to fiscal year 2021, depending on the
recovery speed of the global market for testing equipment and
systems from the highly uncertain economy outlook caused by the
pandemic.
As a
percentage of total revenue, the revenue generated by the testing
services segment in fiscal year 2021 accounted for 42.7% of total
sales compared to 43.0% in fiscal year 2020. In terms of dollar
amounts, the revenue generated by the testing services segment for
fiscal year 2021 was $13,846, reflecting a decrease of $994, or
6.7% compared to $14,840 for fiscal year 2020. The decrease in
revenue generated by the testing segment was primarily
attributable to a decrease in revenue in the Malaysia and China
operations. The decrease was attributable to a decrease in the
volume of testing services requested by our customers in these
operations amid the global pandemic. These decreases were partially
offset by the increase in revenue as a result of higher volume in
the Singapore and Thailand operations during fiscal year 2021. With
effect from fiscal 2022, the Company had increased its average
selling price for testing services. Demand for testing services
varies from country to country, depending on changes taking place
in the market and our customers’ forecasts. Because it is
difficult to accurately forecast fluctuations in the market, we
believe that it is necessary to maintain testing facilities in
close proximity to our customers in order to make it convenient for
them to send us their newly manufactured parts for testing and to
enable us to maintain a share of the market.
Backlog
in the testing services segment as of June 30, 2021, was $3,775, an
increase of $860 as compared to $2,915 at June 30, 2020. The
increase in backlog was mainly from the China operations. The
backlog depends on the estimates volume provided by customers,
which are in turn dependent upon the customers’ inventory
levels and demand.
As a
percentage of total revenue, the revenue generated by the
distribution segment in fiscal year 2021 accounted for 16.7% of
total sales, a decrease of 6.4% compared to 23.1% in fiscal year
2020. In terms of dollar amounts, revenue for fiscal year 2021 was
$5,437, a decrease of $2,521, or 31.7%, compared to $7,958 for
fiscal year 2020. The decrease in revenue in our distribution
segment was due to the decrease in orders from the major customers
in our Singapore operations during the uncertain market caused by
the pandemic.
Backlog
in the distribution segment as of June 30, 2021, was $4,648,
reflecting an increase of $3,239 compared to the backlog of $1,409
at June 30, 2020. The increase in backlog was mainly due to an
increase in the forecast from customers, coupled with the
disruption of the supply, which resulted in the delay of
deliveries. We believe that our competitive advantage in the
distribution segment is our design and engineering capabilities in
components and touch screen products, which allow customization to
meet the specific requirement of our customers. Product volume for
the distribution segment depends on sales activities such as
placing orders and queries for products and backlog. Equipment and
electronic component sales are very competitive, as the products
are readily available in the market.
As a
percentage of total revenue, the revenue generated by the real
estate segment was 0.1% and 0.2% of total sales in fiscal year 2021
and 2020, respectively. In terms of dollar value, revenue generated
by the real estate segment for fiscal years 2021 was $28, a
decrease of $34, or 54.8%, compared to $62 for fiscal year 2020.
Our real estate segment saw a decrease in rental income due to the
low occupancy rate in MaoYe and FuLi properties amid the
pandemic.
Backlog
in the real estate segment as of June 30, 2021 was $40, an increase
of $34 as compared to $6 at June 30, 2020.
Overall Gross Margin
Overall
gross margin as a percentage of revenue was 23.6% in fiscal year
2021, an increase of 2.5% compared to 21.1% in fiscal year 2020.
The increase in gross margin as a percentage of revenue was mainly
attributable to the manufacturing segments. In terms of dollar
value, the overall gross profit for fiscal year 2021 was $7,670, an
increase of $404, or 5.6%, compared to $7,266 for fiscal year 2020.
The increase in the dollar value of the overall gross margin was
mainly due to an increase of sales in the manufacturing segments,
which was partially offset by a decrease in sales in the testing
and distribution segment.
The
gross margin as a percentage of revenue in the manufacturing
segment was 25.4% in fiscal year 2021, an increase of 2.3% compared
to 23.1% in fiscal year 2020. In terms of dollar amounts, the gross
profit for the manufacturing segment in fiscal year 2021 was
$3,342, an increase of $664, or 24.8%, compared to $2,678 in fiscal
year 2020. The increase in the absolute dollar amount of gross
margin was mainly due to an increase in revenue in our Singapore
operations.
The
gross margin as a percentage of revenue in the testing services
segment was 24.7% in fiscal year 2021, an increase of 1.2% compared
to 23.5% in fiscal year 2020. The increase in gross profit margin
as a percentage of revenue was primarily due to the continuous
effort of cost control in the China and Malaysia operations,
despite a decrease in revenue brought about by a decrease in orders
in the China and Malaysia operations. In terms of dollar amounts,
gross profit in the testing services segment in fiscal year 2021
was $3,415, a decrease of $72, or 2.1%, compared to $3,487 in
fiscal year 2020. A
significant portion of our cost of sales is fixed in the testing
segment. Thus, as the demand for services and factory utilization
decreases, the fixed costs are spread over the decreased output,
which decreases the gross profit margin. However, the negative
impact on gross profit margin was partially offset by the cost
saving measures.
-17-
The
gross margin as a percentage of revenue in the distribution segment
was 17.7% in fiscal year 2021, an increase of 3.7% compared to
14.0% in fiscal year 2020. The increase in gross margin
percentage was due to the distribution segment having more sales of
products with a higher profit margin compared to the same period of
last fiscal year. In terms of dollar amounts, gross profit in the
distribution segment was $962, a decrease of $149, or 13.4%,
compared to $1,111 in fiscal year 2020. The gross margin of the
distribution segment was not only affected by the market price of
our products, but also our product mix, which changed frequently as
a result of the changed in market demand.
The
gross loss margin as a percentage of revenue in the real estate
segment was a negative of 175.0% in fiscal year 2021, an increase
of 158.9% compared to 16.1% in fiscal year 2020. In absolute dollar
amount, gross loss margin in the real estate segment was $49 in
fiscal year 2021, an increase of $39 as compared to $10 in fiscal
year 2020. The increase in gross loss was due to lower rental
income amid the pandemic.
Operating Expenses
Operating
expenses for the fiscal years ended June 30, 2021 and 2020 were as
follows:
|
|
For
the Year Ended June 30,
|
|
|
|
2021
|
2020
(Restated)
|
|
General and
administrative
|
$6,938
|
$7,064
|
|
Selling
|
446
|
679
|
|
Research and
development
|
357
|
355
|
|
Impairment loss on
long-lived assets
|
-
|
139
|
|
Gain on disposal of
property, plant and equipment
|
(1)
|
(24)
|
|
Total
|
$7,740
|
$8,213
|
General
and administrative expenses were $6,938 in fiscal year 2021,
compared to $7,064 in fiscal year.
Selling
expenses decreased by $233, or 34.3%, to $446 in fiscal year 2021,
compared to $679 in fiscal year 2020. The decrease in selling
expenses was primarily attributable to a decrease in commission
expenses in the Singapore operations as a result of fewer
commissionable sales, coupled with lower traveling expenses due to
the worldwide travel restrictions imposed to contain the spread of
the pandemic.
Loss from Operations
Loss
from operations was $70 in fiscal year 2021, an increase of $877,
as compared to $947 in fiscal year 2020 (restated).
Interest Expenses
The
interest expenses for fiscal years 2021 and 2020 were as
follows:
|
|
For the Year Ended June
30,
|
|
|
|
2021
|
2020
|
|
Interest
expenses
|
$126
|
$230
|
Interest
expenses decreased by $104, or 45.2%, to $126 in fiscal year 2021
from $230 in fiscal year 2020. The decrease in interest
expenses was mainly due to lower utilization of short-term loans in
the Singapore operations. Additionally, the bank loan payable
decreased by $146 to $2,060 in fiscal year 2021, as compared to
$2,206 in fiscal year 2020.
-18-
Other Income, Net
Other
income, net for fiscal years 2021 and 2020 was as
follows:
|
|
For
the Year Ended June 30,
|
|
|
|
2021
|
2020
|
|
Interest
income
|
$118
|
$177
|
|
Other rental
income
|
100
|
110
|
|
Exchange
loss
|
(69)
|
(35)
|
|
Bad debt recovery/
(expense)
|
9
|
(59)
|
|
Extinguishment of
PPP loan
|
121
|
-
|
|
Dividend
income
|
32
|
-
|
|
Other miscellaneous
income
|
52
|
141
|
|
Total
|
$363
|
$334
|
Other
income increased by $29 to $363 for fiscal year 2021 as compared to
$334 for fiscal year 2020. The increase in other income in fiscal
year 2021 was mainly due to an increase of $32 and $121 from
dividend income and forgiveness of the PPP loan, respectively. The
increase was partially offset by a decrease of $59 in interest
income.
Government grant
During
fiscal year 2021, the Company received government grants amounting
to $514, of which $401 were the financial assistance received from
the Singapore and Malaysia governments amid the COVID-19
pandemic.
During
fiscal year 2020, the Company received government grants amounting
to $778, of which $718 were the financial assistance received from
the Singapore, Malaysia and China governments amid the COVID-19
pandemic.
Gain on Sale of Properties
The
Company’s Malaysia operation completed the sale of properties
and recognized a net gain of RM4,901 or $1,172 in the fiscal year
2020, excluding capital gain tax.
Income Tax (Expenses) / Benefits
Income
tax expenses for fiscal year 2021 were $228, representing an
increase of $240, as compared to income tax benefits of $12 for
fiscal year 2020. The change was primarily because the Company had
fully utilized the tax benefits and was subject to tax in the
Singapore operation. The one-off and non-cash impairment charge
resulted in higher losses before tax, which the Company was still
subjected to tax for those profitable operations.
At June
30, 2021, the Company had no federal net operating loss
carry-forwards, and a state net operating loss carry-forward of
$1,248, which expires in 2033. These carryovers may be subject to
limitations under I.R.C. Section 382. Management of the Company is
uncertain whether it is more likely than not that these future
benefits will be realized. Accordingly, a full valuation allowance
was established.
Loss from Discontinued Operations
Loss
from discontinued operations was $28 and $3 in fiscal years 2021
and 2020, respectively. We discontinued our fabrication segment in
fiscal year 2013.
Noncontrolling Interest
As of
June 30, 2021, we held an indirect 55% interest each in Trio-Tech
(Malaysia) Sdn. Bhd. (“TTM”), Trio-Tech (Kuala Lumpur)
Sdn. Bhd. (“TTKL”), SHI and PT SHI, and a 76% interest
in Prestal Enterprise Sdn. Bhd. (“Prestal”). The
noncontrolling interest for fiscal year 2021, in the net loss of
subsidiaries, was $564, a change of $802 compared to a
noncontrolling interest in the net income of $238 for the previous
fiscal year. The change in the noncontrolling interest was
primarily attributable to the net loss generated by the Malaysia
operation in fiscal year 2021, as compared to the net income
generated by the Malaysia operations from the sales of properties
in fiscal year 2020.
-19-
Net (Loss) / Income Attributable to Trio-Tech International Common
Shareholders
Net
loss attributable for fiscal year 2021 was $591 compared to the net
income of $878 for fiscal year 2020 (restated).
(Loss) / Earnings per Share
Basic
loss per share from continuing operations was $0.16 in fiscal year
2021, as compared to basic earnings per share of $0.24 in fiscal
year 2020 (restated). Basic loss per share from discontinued
operations was $nil for fiscal year 2021 and $nil for fiscal year
2020.
Diluted
loss per
share from continuing operations was $0.15 in fiscal year 2021, as
compared to diluted earnings per share of $0.24 in fiscal year 2020
(restated). Diluted loss per share from discontinued operations was
$nil for fiscal year 2021 and $nil for fiscal year
2020.
Segment Information
The
revenue, gross margin and income or loss from each segment for
fiscal years 2021 and 2020 are presented below. As the segment
revenue and gross margin have been discussed in previous sections,
only the comparison of income or loss from operations is discussed
below.
Manufacturing Segment
The
revenue, gross margin and income/(loss) from operations for the
manufacturing segment for fiscal years 2021 and 2020 were as
follows:
|
|
For
the Year Ended
June
30,
|
|
|
|
2021
|
2020
|
|
Revenue
|
$13,151
|
$11,605
|
|
Gross
margin
|
25.4%
|
23.1%
|
|
Income/(Loss) from
operations
|
$376
|
$(326)
|
Income
from operations in the manufacturing segment was $376 in fiscal
year 2021, an improvement of $702 as compared to a loss from
operations of $326 in fiscal year 2020. The net income was
attributable to an increase in the absolute amount of gross margin
amounting to $664 and a decrease in operating expenses of $38.
Operating expenses were $2,966 and $3,004 for fiscal years 2021 and
2020, respectively. The decrease in operating expenses was mainly
due to a decrease in selling expenses of $76. The decrease was
partially offset by the increase in general and administrative
expenses of $43.
The
decrease in selling expenses was primarily due to lower traveling
expenses amid the pandemic. The increase in general and
administrative expenses was mainly attributable to an increase in
payroll-related expenses.
Testing Services Segment
The
revenue, gross margin and loss from operations for the testing
services segment for fiscal years 2021 and 2020 were as
follows:
|
|
For
the Year Ended
June
30,
|
|
|
|
2021
|
2020
|
|
Revenue
|
$13,846
|
$14,840
|
|
Gross
margin
|
24.7%
|
23.5%
|
|
Loss from
operations
|
$(997)
|
$(1,040)
|
Loss
from operations in the testing services segment in fiscal year 2021
was $997 remained comparable from $1,040 in fiscal year 2020. The
slight decrease in operating loss was attributable to a decrease in
operating expense of $115, partially offset by a decrease in
absolute amount of gross margin of $72. Operating expenses were
$4,412 and $4,527 for fiscal years 2021 and 2020, respectively. The
decrease in operating expenses was mainly attributable to a
decrease in selling expenses, general and administrative expenses
and research and development expenses, coupled with the absence of
any impairment on the long-lived asset in this fiscal
year.
-20-
Distribution Segment
The
revenue, gross margin and income from operations for the
distribution segment for fiscal years 2021 and 2020 were as
follows:
|
|
For
the Year Ended
June
30,
|
|
|
|
2021
|
2020
|
|
Revenue
|
$5,437
|
$7,958
|
|
Gross
margin
|
17.7%
|
14.0%
|
|
Income from
operations
|
$657
|
$751
|
Income
from operations in the distribution segment was $657 in fiscal year
2021 as compared to $751 in fiscal year 2020. The decrease was
mainly due to the decrease in gross margin of $149, as discussed
earlier. These decreases were partly offset by a decrease in
operating expenses. Operating expenses were $306 and $362 for
fiscal years 2021 and 2020, respectively.
Real Estate
The
revenue, gross margin and loss from operations for the real estate
segment for fiscal years 2021 and 2020 were as
follows:
|
|
For
the Year Ended
June
30,
|
|
|
|
2021
|
2020
|
|
Revenue
|
$28
|
$62
|
|
Gross
margin
|
(175.0)%
|
(16.1)%
|
|
Loss from
operations
|
$(116)
|
$(97)
|
Loss
from operations in the real estate segment was $116 in fiscal year
2021 as compared to $97 in fiscal year 2020. Operating expenses
were $67 and $87 in fiscal years 2021 and 2020,
respectively.
Corporate
The
following table presents the loss from operations for Corporate for
fiscal years 2021 and 2020, respectively:
|
|
For the Year
Ended
June 30,
|
|
|
|
2021
|
2020
(Restated)
|
|
Income / (Loss) from
operations
|
$10
|
$(235)
|
In
fiscal year 2021, corporate operating income was $10, a change of
$245 compared to operating loss of $235 in fiscal year
2020.
Liquidity
The
Company’s core businesses—testing services,
manufacturing and distribution—operate in a volatile
industry, in which its average selling prices and product costs are
influenced by competitive factors. These factors create pressures
on sales, costs, earnings and cash flows, which impact liquidity.
Net
cash provided by operating activities decreased by $1,373 to $1,638
for the twelve months ended June 30, 2021, from $3,011 in the same
period of last fiscal year. The decrease in net cash provided by
operating activities was primarily due to a decrease in net income
of $2,271, an increase of $121 due to forgiveness of our PPP loan
and a decrease of $3,457 cash inflow from trade account
receivables. The decrease was partially offset by an increase in
the impairment loss on other assets of $1,580 and an increase in
accounts payables and accrued expenses of $2,345.
Net
cash used in investing activities decreased by $2,050 to an outflow
of $567 for the twelve months ended June 30, 2021 from $2,617 for
the same period of last fiscal year. The decrease in net cash
used in investing activities was primarily due to an increase in
cash inflows of $2,335 from the withdrawal of unrestricted deposits
and a decrease of $1,016 for investments in restricted and
unrestricted deposits. The decrease in cash outflow partially
offset by a decrease of $1,167 from the assets held for sale
proceeds.
Net
cash used in financing activities for the twelve months ended June
30, 2021, was $2, representing a decrease of $730 compared to
$732 during the twelve months ended June 30, 2020. Cash outflow
decreased mainly due to a decrease in a cash outflow of $1,848 from
the payment on lines of credit, and an increase in cash inflow of
$754 and $205 from the stock option exercise proceeds and bank
loans proceeds, respectively. The increase in cash outflow was
partially offset by a decrease in lines of credit payments by
$1,888, and elimination of PPP loan amounting to $121.
We
believe that our projected cash flows from operations, borrowing
availability under our revolving lines of credit, cash on hand,
trade credit and the secured bank loans will provide the necessary
financial resources to meet our projected cash requirements for at
least the next 12 months. Should we find an attractive capital
investment, we may seek additional debt or equity financing in
order to fund the transaction, in the form of bank financing,
convertible debt, or the issuance of Common Stock.
-21-
Capital Resources
Our
working capital (defined as current assets minus current
liabilities) has historically been generated primarily from the
following sources: operating cash flow, availability under our
revolving line of credit, and short-term loans. The working capital
was $15,200 as of June 30, 2021, representing an increase of
$2,243, or 17.3%, compared to working capital of $12,957 as of June
30, 2020 (restated). The increase in working capital was mainly due
to increases in current assets such as cash and cash equivalents,
trade account receivables, inventories, prepaid expenses and other
current assets and decreases in current liabilities such as lines
of credit, income taxes payable, bank loans payable, finance leases
and PPP loan. Such fluctuations were partially offset by decreases
in current assets such as short-term deposits, other receivables
and increases in current liabilities such as accounts payable,
accrued expenses, and operating lease payable, as discussed
above.
The
majority of our capital expenditures are based on demands from our
customers, as we are operating in a capital-intensive industry. Our
capital expenditures were $1,112 and $1,017 for fiscal year 2021
and fiscal year 2020, respectively. The capital expenditures in
fiscal year 2021 were mainly in the Singapore, China, Malaysia and
Thailand operations, which provide testing services to our
customers. We financed our capital expenditures and other operating
expenses through operating cash flows and long-term
debts.
Our
credit rating provides us with ready and adequate access to funds
in the global market. At June 30, 2021, the Company had certain
lines of credit that are collateralized by restricted
deposits.
|
Entity
with
|
Type
of
|
Interest
|
Expiration
|
Credit
|
Unused
|
|
Facility
|
Facility
|
Rate
|
Date
|
Limitation
|
Credit
|
|
Trio-Tech
International Pte. Ltd., Singapore
|
Lines of
Credit
|
Ranging from 1.85%
to 5.5%,
SIBOR rate +1.2%
and LIBOR rate +1.25%
|
-
|
$4,237
|
$4,237
|
|
Universal (Far
East) Pte. Ltd., Singapore
|
Lines of
Credit
|
Ranging from 1.85%
to 5.5%
|
-
|
$1,115
|
$1,043
|
|
Trio-Tech Malaysia
Sdn. Bhd., Malaysia
|
Revolving
Credit
|
Cost of Funds Rate
+2%
|
-
|
$361
|
$361
|
As of
June 30, 2020, the Company had certain lines of credit that are
collateralized by restricted deposits.
|
Entity
with
|
Type
of
|
Interest
|
Expiration
|
Credit
|
Unused
|
|
Facility
|
Facility
|
Rate
|
Date
|
Limitation
|
Credit
|
|
Trio-Tech
International Pte. Ltd., Singapore
|
Lines of
Credit
|
Ranging from 1.85%
to 5.5%,
SIBOR rate +1.25%
and LIBOR rate +1.30%
|
-
|
$4,806
|
$4,806
|
|
Universal (Far
East) Pte. Ltd., Singapore
|
Lines of
Credit
|
Ranging from 1.85%
to 5.5%
|
-
|
$359
|
$187
|
|
Trio-Tech Malaysia
Sdn. Bhd., Malaysia
|
Revolving
Credit
|
Cost of Funds Rate
+2%
|
-
|
$350
|
$350
|
On
November 18, 2019, Trio-Tech International Pte. Ltd. signed an
agreement with JECC Leasing (Singapore) Pte. Ltd. for an Account
Receivables Financing facility for SGD 1,000, or approximately $743
based on the market exchange rate. Interest is charged at LIBOR
rate +1.3% for USD financing and SIBOR rate +1.25% for SGD
financing. The financing facility was set up to facilitate the
working capital in our operations in Singapore. The Company started
to use this facility in the second quarter of fiscal year
2020.
Off-Balance Sheet Arrangements
We do
not consider the Company to have any off-balance sheet arrangements
that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources.
-22-
ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
As a
smaller reporting company as defined by Rule 12b-2 of the
Securities Exchange Act of 1934, we are not required to provide the
information required by this item.
ITEM
8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The
information called for by this item is included in the Company's
consolidated financial statements beginning on page F-2 of this
Annual Report on Form 10-K.
ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A – CONTROLS AND
PROCEDURES
An
evaluation was carried out by the Company’s Chief Executive
Officer and Chief Financial Officer (the principal executive and
principal financial officers, respectively, of the Company) of the
effectiveness of the Company’s disclosure controls and
procedures (as defined in Rule 13a-15(e) or 15d-15(e) promulgated
under the Securities Exchange Act of 1934, as amended) as of June
30, 2021, the end of the period covered by this Form 10-K. Based
upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company’s disclosure
controls and procedures were effective as of June 30,
2021.
Additionally,
management has the responsibility for establishing and maintaining
adequate internal control over financial reporting for the Company
and thus also assessed the effectiveness of our internal controls
over financial reporting as of June 30, 2021. Management used the
framework set forth in the report entitled “Internal Control
– Integrated Framework” published by the Committee of
Sponsoring Organizations of the Treadway Commission in 2013 to
evaluate the effectiveness of the Company’s internal control
over financial reporting.
Internal
control over financial reporting refers to the process designed by,
or under the supervision of, our Chief Executive Officer and Chief
Financial Officer, and effected by our Board of Directors,
management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of consolidated financial statements for external
purpose in accordance with U.S. generally accepted accounting
principles, and includes those policies and procedures
that:
1. Pertain to the
maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of
the Company;
2. Provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of consolidated financial statements in
accordance with U.S. generally accepted accounting principles, and
that receipts and expenditures of the Company are being made only
in accordance with authorization of management and directors of the
Company; and
3. Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, and use or disposition of the
Company’s assets that could have a material effect on the
consolidated financial statements.
Internal
control over financial reporting cannot provide absolute assurance
of achieving financial reporting objectives because of its inherent
limitations. Internal control over financial reporting is a process
that involves human diligence and compliance and is subject to
lapses in judgment and breakdowns resulting from human failures.
Internal control over financial reporting also can be circumvented
by collusion or improper management override. Because of such
limitations, there is a risk that material misstatements may not be
prevented or detected on a timely basis by internal control over
financial reporting. However, these inherent limitations are known
features of the financial reporting process. Therefore, it is
possible to design into the process safeguards to reduce, though
not eliminate, the risk.
Based
on that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the Company’s internal controls over
financial reporting were effective as of June 30,
2021.
-23-
Changes in Internal Control Over Financial Reporting
Except as discussed below, there has been no change in the
Company’s internal control over financial reporting
during the fourth quarter of Fiscal 2021, which were identified in
connection with management’s evaluation required by paragraph
(d) of rules 13a-15 and 15d-15 under the Exchange Act, that
have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial
reporting.
Change in Technical Accounting Consultant
Effective
Q4 FY21, we have hired a technical accounting consultant believed
to possess expert knowledge on GAAP reporting to perform review on
matters that are assessed to be complex, subjective and judgemental
and at the management’s discretion. We expect the new
consultant to further strengthen our internal financial controls
that support accurate and reliable financial
reporting.
Enterprise Resource Planning (ERP) Implementation
We are in the process of implementing an ERP System, as part of a
multi-year plan to integrate and upgrade our systems and processes.
The implementation of this ERP system was scheduled to occur in
phases over a few years. The operational and financial
systems in our Singapore and Malaysia operations were transitioned
to the new system in fiscal 2018 and fiscal 2019,
respectively.
The operational and financial systems in our Tianjin and Suzhou
operations were fully transitioned to the new system during the
second quarter of fiscal 2021. This implementation effort will
continue until the Company's consolidation process is substantially
automated using the new system in fiscal 2022.
As a phased implementation of this system occurs, we are
experiencing certain changes to our processes and procedures which,
in turn, result in changes to our internal control over financial
reporting. While we expect the new ERP system to strengthen our
internal financial controls by automating certain manual processes
and standardizing business processes and reporting across our
organization, management will continue to evaluate and monitor our
internal controls as processes and procedures in each of the
affected areas evolve.
ITEM 9B – OTHER INFORMATION
None.
ITEM 9C – DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT
PREVENT INSPECTIONS
Not
applicable.
-24-
PART III
The
information required by Items 10 through 14 of Part III of this
Form 10-K (information regarding our directors and executive
officers, executive compensation, security ownership of certain
beneficial owners, management, related stockholder matters, and
certain relationships and related transactions and principal
accountant fees and services) is hereby incorporated by reference
from the Company's Proxy Statement to be filed with the Securities
and Exchange Commission within 120 days after the end of fiscal
year 2021.
PART IV
ITEM 15 – EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
(a) (1 and
2)
FINANCIAL
STATEMENTS AND SCHEDULES:
The
following financial statements, including notes thereto and the
independent auditors' report with respect thereto, are filed as
part of this Annual Report on Form 10-K, starting on page 34
hereof:
1.
Report of
Independent Registered Public Accounting Firm
2.
Consolidated
Balance Sheets
3.
Consolidated
Statements of Operations and Comprehensive Income
(Loss)
4.
Consolidated
Statements of Shareholders' Equity
5.
Consolidated
Statements of Cash Flows
6.
Notes to
Consolidated Financial Statements
(b)
The exhibits filed
as part of this Annual Report on Form 10K are set forth on the
Exhibit Index immediately preceding such exhibits, and are
incorporated herein by reference.
ITEM 16 – FORM 10-K SUMMARY
Not
applicable.
-25-
Pursuant
to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
TRIO-TECH
INTERNATIONAL
By:
/s/ Victor H.M.
Ting
VICTOR
H.M. TING
Vice
President and
Chief
Financial Officer
October
1, 2021
|
Pursuant
to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of
the Registrant and in the capacity and on the dates
indicated.
|
|
/s/ A. Charles Wilson
A. Charles Wilson, Director Chairman of the
Board
October 1,
2021
/s/ S.W.Yong
S. W. Yong,
Director
President, Chief
Executive Officer
(Principal
Executive Officer)
October 1,
2021
/s/ Victor H. M. Ting
Victor H.M. Ting,
Director
Vice
President,
and
Chief Financial Officer
(Principal
Financial Officer)
October 1,
2021
/s/
Jason T.
Adelman
Jason T. Adelman,
Director
October 1,
2021
/s/
Richard M.
Horowitz
Richard
M. Horowitz, Director
October 1,
2021
|
-26-
EXHIBITS:
|
Number
|
Description
|
|
Articles
of Incorporation, as currently in effect. [Incorporated by
reference to Exhibit 3.1 to the Registrant’s Annual Report on
Form 10-K for June 30, 1988.]
|
|
|
|
|
|
Bylaws,
as currently in effect. [Incorporated by reference to Exhibit 3.2
to the Registrant’s Annual Report on Form 10-K for June 30,
1988.]
|
|
|
|
|
|
Amendment
to 2007 Employee Stock Option Plan [Incorporated by reference to
Exhibit A to the Registrant’s Proxy Statement for its Annual
Meeting held December 14, 2010.]**
|
|
|
|
|
|
Amendment
to 2007 Directors Equity Incentive Plan [Incorporated by reference
to Exhibit B to the Registrant’s Proxy Statement for its
Annual Meeting held December 14, 2010.]**
|
|
|
|
|
|
Amendment
to 2007 Directors Equity Incentive Plan [Incorporated by reference
to Appendix A to the Registrant’s Proxy Statement for its
Annual Meeting held December 9, 2013.]**
|
|
|
|
|
|
2017
Employee Stock Option Plan [Incorporated by reference to Appendix 1
to the Registrant’s Proxy Statement for its Annual Meeting
held December 4, 2017.]**
|
|
|
|
|
|
2017
Directors Equity Incentive Plan [Incorporated by reference to
Appendix 2 to the Registrant’s Proxy Statement for its Annual
Meeting held December 4, 2017.]**
|
|
|
|
|
|
Amendment to 2017
Directors Equity Incentive Plan
|
|
|
|
|
|
21.1
|
Subsidiaries
of the Registrant (100% owned by the Registrant except as otherwise
stated)
|
|
|
|
|
|
Express
Test Corporation (Dormant), a California Corporation
|
|
|
Trio-Tech
Reliability Services (Dormant), a California
Corporation
|
|
|
KTS
Incorporated, dba Universal Systems (Dormant), a California
Corporation
|
|
|
European
Electronic Test Center. Ltd., a Cayman Islands Corporation
(Operation ceased on November 1, 2005)
|
|
|
Trio-Tech
International Pte. Ltd., a Singapore Corporation
|
|
|
Universal
(Far East) Pte. Ltd., a Singapore Corporation
|
|
|
Trio-Tech
International (Thailand) Co., Ltd., a Thailand
Corporation
|
|
|
Trio-Tech
(Bangkok) Co., Ltd., a Thailand Corporation
|
|
|
Trio-Tech
(Malaysia) Sdn Bhd., a Malaysia Corporation (55% owned by the
subsidiary of Registrant)
|
|
|
Trio-Tech
(Kuala Lumpur) Sdn Bhd., a Malaysia Corporation (100% owned by
Trio-Tech Malaysia)
|
|
|
Prestal
Enterprise Sdn. Bhd., a Malaysia Corporation (76% owned by
Trio-Tech International Pte. Ltd., a Singapore
Corporation)
|
|
|
Trio-Tech
(SIP) Co., Ltd., a China Corporation
|
|
|
Trio-Tech
(Chongqing) Co. Ltd., (100% owned by Trio-Tech International Pte.
Ltd., a Singapore Corporation)
|
|
|
SHI
International Pte. Ltd, a Singapore Corporation (55% owned
Trio-Tech International Pte. Ltd., a Singapore
Corporation)
|
|
|
PT SHI
Indonesia, an Indonesia Corporation (100% owned by SHI
International Pte. Ltd., a Singapore Corporation)
|
|
|
Trio-Tech
(Tianjin) Co., Ltd., a China Corporation (100% owned by Trio-Tech
International Pte. Ltd., a Singapore Corporation)
|
|
|
|
|
Consent
of Independent Registered Public Accounting Firm*
|
|
|
|
|
|
Rule
13a-14(a) Certification of Principal Executive Officer of
Registrant*
|
|
|
|
|
|
Rule
13a-14(a) Certification of Principal Financial Officer of
Registrant*
|
|
|
|
|
|
Section
1350 Certification. *
|
|
|
|
|
|
101.INS*
|
XBRL
Instance Document
|
|
101.SCH*
|
XBRL
Taxonomy Extension Schema
|
|
101.CAL*
|
XBRL
Taxonomy Extension Calculation Linkbase
|
|
101.DEF*
|
XBRL
Taxonomy Extension Definition Linkbase
|
|
101.LAB*
|
XBRL
Taxonomy Extension Label Linkbase
|
|
101.PRE*
|
XBRL
Taxonomy Extension Presentation Linkbase
|
* Filed
electronically herewith.
**
Indicates management contracts or compensatory plans or
arrangements required to be filed as an exhibit to this
report.
-27-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The
Board of Directors and Shareholders
Trio-Tech
International
Van
Nuys, California
Opinion on the Financial Statements
We have
audited the accompanying consolidated balance sheets of Trio-Tech
International and Subsidiaries (the “Company”) as of
June 30, 2021 and 2020, and the related consolidated
statements of operations and comprehensive income (loss),
shareholders’ equity and cash flows for each of the two years
in the period ended June 30, 2021, and the related notes
(collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the
consolidated financial position of the Company as of June 30, 2021
and 2020, and the consolidated results of its operations and its
cash flows for each of the two years in the period ended June 30,
2021, in conformity with accounting principles generally accepted
in the United States of America.
Basis for Opinion
These
consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements
based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States)
(“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation
of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical
Audit Matter
The
critical audit matter communicated below is a matter arising from
the current period audit of the consolidated financial statements
that was communicated or required to be communicated to audit
committee and that: (1) relate to accounts or disclosures that are
material to the consolidated financial statements and (2) involved
our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way
our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter
below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.
As discussed in
Note 10 to the consolidated financial statements, the Company
recognized an impairment loss relating to the down payment made for
an investment property located in Chongqing, China of $1.58 million
(equivalent RMB10.2 million) during the financial year ended June
30, 2021.
We identified our
evaluation of the recoverability of the down payment as a critical
audit matter as the review of management’s significant
assumptions and judgment applied in their measurement of the down
payment is challenging and subjective in light of the recent
developments and outlook. The recoverability of the down payment is
highly dependent on the reliability of the key assumptions applied
by management, such as the expected completion date of the project
and the market rates of comparable completed projects.
The
primary procedures we performed to address this critical audit
matter thus included the following:
●
Inspected the sales and purchase
agreement for the down payment for the investment
property;
●
Performed physical site inspection
of the project;
●
Conducted interview with the local
developer on the status of the project;
●
Assessed the methodology used by
the Company to estimate the fair value of the investment
property;
●
Evaluated and challenged the key
inputs and assumptions underlying the Company’s assessment
and valuation in view of the facts and circumstances existing as of
the measurement date, relevant political and economic outlook and
other applicable sources; and
●
Inquired local independent
professionals on the local property market to verify the
representations made by the management and local
developer.
Mazars
LLP
PUBLIC
ACCOUNTANTS AND CHARTERED ACCOUNTANTS
We have
served as the company’s auditors since 2009
/s/ Mazars
LLP
Singapore
October 1, 2021
F-1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
AUDITED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
|
|
June 30,
2021
|
June 30,
2020
(Restated)
|
|
ASSETS
|
|
|
|
CURRENT ASSETS:
|
|
|
|
Cash
and cash equivalents
|
$5,836
|
$4,150
|
|
Short-term
deposits
|
6,651
|
6,838
|
|
Trade
account receivables, less allowance for doubtful accounts of $311
and $314,
Respectively
|
8,293
|
5,951
|
|
Other
receivables
|
662
|
998
|
|
Inventories,
less provision for obsolete inventories of $679 and $678,
respectively
|
2,080
|
1,922
|
|
Prepaid
expenses and other current assets
|
418
|
341
|
|
Financed
sales receivable
|
19
|
-
|
|
Total
current assets
|
23,959
|
20,200
|
|
NON-CURRENT
ASSETS:
|
|
|
|
Deferred
tax assets
|
217
|
247
|
|
Investment
properties, net
|
681
|
690
|
|
Property,
plant and equipment, net
|
9,531
|
10,310
|
|
Operating
lease right-of-use assets
|
1,876
|
944
|
|
Other
assets
|
262
|
1,609
|
|
Financed
sales receivable
|
39
|
-
|
|
Restricted
term deposits
|
1,741
|
1,660
|
|
Total
non-current assets
|
14,347
|
15,460
|
|
TOTAL
ASSETS
|
$38,306
|
$35,660
|
|
|
|
|
|
LIABILITIES
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Lines
of credit
|
$72
|
$172
|
|
Accounts
payable
|
3,702
|
2,590
|
|
Accrued
expenses
|
3,363
|
3,005
|
|
Income
taxes payable
|
314
|
344
|
|
Current
portion of bank loans payable
|
439
|
370
|
|
Current
portion of finance leases
|
197
|
231
|
|
Current
portion of operating leases
|
672
|
477
|
|
Current
portion of PPP loan
|
-
|
54
|
|
Total
current liabilities
|
8,759
|
7,243
|
|
NON-CURRENT
LIABILITIES:
|
|
|
|
Bank
loans payable, net of current portion
|
1,621
|
1,836
|
|
Finance leases,
net of current portion
|
253
|
435
|
|
Operating
leases, net of current portion
|
1,204
|
467
|
|
Income
taxes payable
|
385
|
430
|
|
PPP
loan, net of current portion
|
-
|
67
|
|
Other
non-current liabilities
|
31
|
36
|
|
Total
non-current liabilities
|
3,494
|
3,271
|
|
TOTAL
LIABILITIES
|
$12,253
|
$10,514
|
|
|
|
|
|
EQUITY
|
|
|
|
TRIO-TECH INTERNATIONAL’S
SHAREHOLDERS' EQUITY:
|
|
|
|
Common stock, no par value,
15,000,000 shares authorized; 3,913,055 and 3,673,055 shares issued
and outstanding as at June 30, 2021 and June 30, 2020,
respectively
|
$12,178
|
$11,424
|
|
Paid-in capital
|
4,233
|
3,984
|
|
Accumulated retained
earnings
|
6,824
|
7,415
|
|
Accumulated other comprehensive
gain-translation adjustments
|
2,399
|
1,143
|
|
Total
Trio-Tech International shareholders' equity
|
25,634
|
23,966
|
|
Noncontrolling
interest
|
419
|
1,180
|
|
TOTAL
EQUITY
|
$26,053
|
$25,146
|
|
TOTAL
LIABILITIES AND EQUITY
|
$38,306
|
$35,660
|
See notes to consolidated financial
statements.
F-2
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
AUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME (LOSS)
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
|
|
For the Year
Ended
|
|
|
|
|
June
30,
|
|
|
June
30,
2021
|
2020
(Restated)
|
|
Revenue
|
|
|
|
Manufacturing
|
$13,151
|
$11,605
|
|
Testing
services
|
13,846
|
14,840
|
|
Distribution
|
5,437
|
7,958
|
|
Real
estate
|
28
|
62
|
|
|
32,462
|
34,465
|
|
Cost of
Sales
|
|
|
|
Cost of
manufactured products sold
|
9,809
|
8,927
|
|
Cost of testing
services rendered
|
10,431
|
11,353
|
|
Cost of
distribution
|
4,475
|
6,847
|
|
Cost of real
estate
|
77
|
72
|
|
|
24,792
|
27,199
|
|
|
|
|
|
Gross
Margin
|
7,670
|
7,266
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
General and
administrative**
|
6,938
|
7,064
|
|
Selling
|
446
|
679
|
|
Research and
development
|
357
|
355
|
|
Impairment loss on
long-lived assets
|
-
|
139
|
|
Gain on disposal of
property, plant and equipment
|
(1)
|
(24)
|
|
Total operating
expenses
|
7,740
|
8,213
|
|
|
|
|
|
Loss from
Operations
|
(70)
|
(947)
|
|
|
|
|
|
Other (Expenses)
/ Income
|
|
|
|
Interest
expenses
|
(126)
|
(230)
|
|
Other income,
net
|
363
|
334
|
|
Government
grants
|
514
|
778
|
|
Gain on sale of
properties
|
-
|
1,172
|
|
Impairment loss on other
assets
|
(1,580)
|
-
|
|
Total other (expenses) /
income
|
(829)
|
2,054
|
|
|
|
|
|
(Loss) / Income
from Continuing Operations before Income
Taxes
|
(899)
|
1,107
|
|
|
|
|
|
Income Tax
(Expenses)/Benefits
|
(228)
|
12
|
|
|
|
|
|
(Loss) / Income from continuing
operations before noncontrolling interests, net of
tax
|
(1,127)
|
1,119
|
|
|
|
|
|
Discontinued
Operations
|
|
|
|
Loss from discontinued operations,
net of tax
|
(28)
|
(3)
|
|
NET (LOSS) /
INCOME
|
(1,155)
|
1,116
|
|
|
|
|
|
Less: net (loss)/income attributable
to noncontrolling interests
|
(564)
|
238
|
|
Net (Loss) /
Income Attributable to Trio-Tech International Common
Shareholders
|
$(591)
|
$878
|
|
|
|
|
|
Amounts
Attributable to Trio-Tech International Common
Shareholders:
|
|
|
|
(Loss)/ Income from continuing
operations, net of tax
|
(575)
|
879
|
|
Loss from discontinued operations,
net of tax
|
(16)
|
(1)
|
|
Net (Loss)/
Income Attributable to Trio-Tech International Common
Shareholders
|
$(591)
|
$878
|
|
|
|
|
|
Basic (Loss) /
Earnings per Share:
|
|
|
|
Basic (loss) / earnings per share
from continuing operations attributable to Trio-Tech
International
|
$(0.16)
|
$0.24
|
|
Basic loss per share from
discontinued operations attributable to Trio-Tech
International
|
$-
|
$-
|
|
Basic (Loss) /
Earnings per Share from Net Income
|
|
|
|
Attributable to
Trio-Tech International
|
$(0.16)
|
$0.24
|
|
|
|
|
|
Diluted (Loss) /
Earnings per Share:
|
|
|
|
Diluted (loss) / earnings per share
from continuing operations attributable to Trio-Tech
International
|
$(0.15)
|
$0.24
|
|
Diluted loss per share from
discontinued operations attributable to Trio-Tech
International
|
-
|
-
|
|
Diluted (Loss) /
Earnings per Share from Net Income
|
|
|
|
Attributable to
Trio-Tech International
|
$(0.15)
|
$0.24
|
|
|
|
|
|
Weighted average number of common
shares outstanding
|
|
|
|
Basic
|
3,768
|
3,673
|
|
Dilutive effect of stock
options
|
117
|
53
|
|
Number of shares used to compute
earnings per share diluted
|
3,885
|
3,726
|
See
notes to consolidated financial statements.
F-3
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME /
(LOSS)
(IN THOUSANDS)
|
|
For
the Year Ended
|
|
|
|
|
June
30,
|
|
|
June
30,
2021
|
2020
(Restated)
|
|
Comprehensive
Income Attributable to Trio-Tech
International Common
Shareholders:
|
|
|
|
|
|
|
|
Net (loss) /
income
|
$(1,155)
|
1,116
|
|
Foreign currency
translation, net of tax
|
1,248
|
(742)
|
|
Comprehensive
Income
|
93
|
374
|
|
Less: comprehensive
(loss) / income attributable to the noncontrolling
interests
|
(572)
|
220
|
|
Comprehensive
Income Attributable to Trio-Tech International Common
Shareholders
|
$665
|
$154
|
|
|
|
|
See
notes to consolidated financial statements.
F-4
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
|
|
Common
Stock
|
Paid-in
|
Accumulated
Retained
|
Accumulated
Other
Comprehensive
|
Non-
Controlling
|
|
|
|
|
No. of
Shares
|
Amount
|
Capital
|
Earnings
|
Income
|
Interests
|
Total
|
|
|
$
|
$
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2019
(Restated)
|
3,673
|
11,424
|
3,838
|
6,537
|
1,867
|
1,195
|
24,861
|
|
|
|
|
|
|
|
|
|
|
Stock option expenses
(Restated)
|
-
|
-
|
146
|
-
|
-
|
-
|
146
|
|
Net income
(Restated)
|
-
|
-
|
-
|
878
|
-
|
238
|
1,116
|
|
Dividend declared by
subsidiary
|
-
|
-
|
-
|
-
|
-
|
(235)
|
(235)
|
|
Translation
adjustment
|
-
|
-
|
-
|
-
|
(724)
|
(18)
|
(742)
|
|
Balance at June 30, 2020
(Restated)
|
3,673
|
11,424
|
3,984
|
7,415
|
1,143
|
1,180
|
25,146
|
|
|
|
|
|
|
|
|
|
|
Stock option
expenses
|
-
|
-
|
249
|
-
|
-
|
-
|
249
|
|
Net loss
|
-
|
-
|
-
|
(591)
|
-
|
(564)
|
(1,155)
|
|
Dividend declared by
subsidiary
|
-
|
-
|
-
|
-
|
-
|
(189)
|
(189)
|
|
Exercise of
options
|
240
|
754
|
-
|
-
|
-
|
-
|
754
|
|
Translation
adjustment
|
-
|
-
|
-
|
-
|
1,256
|
(8)
|
1,248
|
|
Balance at June 30,
2021
|
3,913
|
12,178
|
4,233
|
6,824
|
2,399
|
419
|
26,053
|
See
accompanying notes to consolidated financial
statements.
F-5
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (IN
THOUSANDS)
|
|
Year
Ended
|
|
|
|
|
June
30,
|
|
|
June
30,
2021
|
2020
(Restated)
|
|
|
|
|
|
Cash
Flow from Operating Activities
|
|
|
|
Net
income
|
$(1,155)
|
$1,116
|
|
Adjustments to
reconcile net income to net cash flow provided by operating
activities
|
|
|
|
Gain
on sale of assets held for sale
|
-
|
(1,172)
|
|
Depreciation
and amortization
|
3,059
|
3,100
|
|
Impairment loss on
other assets
|
1,580
|
-
|
|
Impairment
loss on long-lived assets
|
-
|
139
|
|
Stock
option expenses
|
249
|
146
|
|
(Reversal)
/ Addition of obsolete inventories
|
(15)
|
18
|
|
Payment
of interest portion of finance leases
|
(40)
|
(61)
|
|
Bad
debt (recovery) / expenses
|
(9)
|
59
|
|
Accrued
interest expense, net accrued (interest income)
|
29
|
(69)
|
|
PPP
loan forgiveness income
|
(121)
|
-
|
|
Dividend
income
|
(32)
|
-
|
|
Dividend
received
|
32
|
-
|
|
Gain on sale of
property, plant and equipment
|
(1)
|
(24)
|
|
Warranty
addition/ (recovery), net
|
3
|
(26)
|
|
Deferred
tax (benefit)/ expenses
|
(139)
|
63
|
|
Changes in
operating assets and liabilities, net of acquisition
effects
|
|
|
|
Trade
account receivables
|
(2,347)
|
1,110
|
|
Other
receivables
|
336
|
(181)
|
|
Other
assets
|
(327)
|
100
|
|
Inventories
|
(98)
|
430
|
|
Prepaid expenses and other current assets
|
(97)
|
(54)
|
|
Accounts payable and accrued expenses
|
1,377
|
(968)
|
|
Income
taxes payable
|
118
|
12
|
|
Operating
leases liabilities
|
(764)
|
(727)
|
|
Net
Cash Provided by Operating Activities
|
1,638
|
3,011
|
|
|
|
|
|
Cash
Flow from Investing Activities
|
|
|
|
Proceeds from sale
of assets held for sale
|
-
|
1,167
|
|
Proceeds from
disposal of property, plant and equipment
|
-
|
39
|
|
Withdrawal of
unrestricted deposit
|
2,335
|
-
|
|
Investments in
restricted and unrestricted deposits
|
(1,790)
|
(2,806)
|
|
Addition to
property, plant and equipment
|
(1,112)
|
(1,017)
|
|
Net
Cash Used in Investing Activities
|
(567)
|
(2,617)
|
|
|
|
|
|
Cash
Flow from Financing Activities
|
|
|
|
Payment on lines of
credit
|
(589)
|
(2,437)
|
|
Payment of bank
loans
|
(412)
|
(486)
|
|
Payment of
principal portion of finance leases
|
(253)
|
(344)
|
|
Dividends paid on
noncontrolling interest
|
(189)
|
(235)
|
|
Proceeds from
exercising stock options
|
754
|
-
|
|
Proceeds from bank
loans
|
205
|
-
|
|
Proceeds from lines
of credit
|
482
|
2,370
|
|
Proceeds from
finance leases
|
-
|
279
|
|
Proceeds from PPP
loan
|
-
|
121
|
|
Net
Cash Used in Financing Activities
|
(2)
|
(732)
|
|
|
|
|
|
Effect
of Changes in Exchange Rate
|
698
|
(421)
|
|
|
|
|
|
Net
Increase/ (Decrease) in Cash, Cash Equivalents, and Restricted
Cash
|
1,767
|
(759)
|
|
Cash,
Cash Equivalents, and Restricted Cash at Beginning of
Period
|
5,810
|
6,569
|
|
Cash,
Cash Equivalents, and Restricted Cash at End of Period
|
$7,577
|
$5,810
|
|
|
|
|
|
Supplementary
Information of Cash Flows
|
|
|
|
Cash paid during
the period for:
|
|
|
|
Interest
|
$122
|
$229
|
|
Income
taxes
|
$207
|
$126
|
|
|
|
|
|
Non-Cash
Transactions
|
|
|
|
Finance
lease of property, plant and equipment
|
$-
|
$279
|
See
accompanying notes to consolidated financial
statements.
|
Reconciliation
of Cash, Cash Equivalents, and Restricted Cash
|
|
|
|
Cash
|
5,836
|
4,150
|
|
Restricted
Term Deposits
|
1,741
|
1,660
|
|
Total
Cash, Cash Equivalents, and Restricted Cash Shown in Statement of
Cash Flows
|
$7,577
|
$5,810
|
Amounts
included in restricted deposits represent the amount of cash
pledged to secure loans payable or trade financing granted by
financial institutions and serve as collateral for public utility
agreements such as electricity and water. Restricted deposits are
classified as non-current assets, as they relate to long-term
obligations and will become unrestricted only upon discharge of the
obligations.
F-6
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2021 AND 2020
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
1.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES.
Basis of Presentation and Principles of Consolidation
- Trio-Tech
International (the “Company” or “TTI”
hereafter) was incorporated in fiscal 1958 under the laws of the
State of California. TTI provides third-party semiconductor
testing and burn-in services primarily through its laboratories in
Southeast Asia. In addition, TTI operates testing facilities in the
United States. The Company also designs, develops,
manufactures and markets a broad range of equipment and systems
used in the manufacturing and testing of semiconductor devices and
electronic components. In fiscal 2021, TTI conducted business in
four business segments: manufacturing, testing services,
distribution and real estate. TTI has subsidiaries in the U.S.,
Singapore, Malaysia, Thailand, Indonesia, Ireland and China as
follows:
|
|
Ownership
|
Location
|
|
Express
Test Corporation (Dormant)
|
100%
|
Van
Nuys, California
|
|
Trio-Tech
Reliability Services (Dormant)
|
100%
|
Van
Nuys, California
|
|
KTS
Incorporated, dba Universal Systems (Dormant)
|
100%
|
Van
Nuys, California
|
|
European
Electronic Test Centre (Dormant)
|
100%
|
Dublin,
Ireland
|
|
Trio-Tech
International Pte. Ltd.
|
100%
|
Singapore
|
|
Universal
(Far East) Pte. Ltd. *
|
100%
|
Singapore
|
|
Trio-Tech
International (Thailand) Co. Ltd. *
|
100%
|
Bangkok,
Thailand
|
|
Trio-Tech
(Bangkok) Co. Ltd.*
|
100%
|
Bangkok,
Thailand
|
|
Trio-Tech
(Malaysia) Sdn. Bhd.
(55%
owned by Trio-Tech International Pte. Ltd.)
|
55%
|
Penang
and Selangor, Malaysia
|
|
Trio-Tech
(Kuala Lumpur) Sdn. Bhd.
|
55%
|
Selangor,
Malaysia
|
|
(100%
owned by Trio-Tech Malaysia Sdn. Bhd.)
|
|
|
|
Prestal
Enterprise Sdn. Bhd.
|
76%
|
Selangor,
Malaysia
|
|
(76%
owned by Trio-Tech International Pte. Ltd.)
|
|
|
|
Trio-Tech
(SIP) Co., Ltd. *
|
100%
|
Suzhou,
China
|
|
Trio-Tech
(Chongqing) Co. Ltd. *
|
100%
|
Chongqing,
China
|
|
SHI
International Pte. Ltd. (Dormant)
(55%
owned by Trio-Tech International Pte. Ltd)
|
55%
|
Singapore
|
|
PT SHI
Indonesia (Dormant)
(100%
owned by SHI International Pte. Ltd.)
|
55%
|
Batam,
Indonesia
|
|
Trio-Tech
(Tianjin) Co., Ltd. *
|
100%
|
Tianjin,
China
|
* 100%
owned by Trio-Tech International Pte. Ltd.
The
consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of
America (“U.S. GAAP’’). The basis of accounting
differs from that used in the statutory financial statements of the
Company’s subsidiaries and equity investee companies, which
are prepared in accordance with the accounting principles generally
accepted in their respective countries of incorporation. In the
opinion of management, the consolidated financial statements have
reflected all costs incurred by the Company and its subsidiaries in
operating the business.
All
dollar amounts in the consolidated financial statements and in the
notes herein are presented in thousands of United States dollars
(US$’000) unless otherwise designated.
Liquidity –
The Company incurred net loss attributable to common shareholders
of $591 and net income attributable to common shareholders of $878
for fiscal years 2021 and 2020, respectively.
The
Company’s core businesses - testing services, manufacturing
and distribution - operate in a volatile industry, whereby its
average selling prices and product costs are influenced by
competitive factors. These factors create pressures on sales,
costs, earnings and cash flows, which will impact liquidity.
F-7
Foreign Currency Translation and Transactions —
The U.S. dollar is the functional
currency of the U.S. parent company. The Singapore dollar, the
national currency of Singapore, is the primary currency of the
economic environment in which the operations in Singapore are
conducted. The Company also has business entities in Malaysia,
Thailand, China and Indonesia of which the Malaysian ringgit
(“RM”), Thai baht, Chinese renminbi (“RMB”)
and Indonesian rupiah, are the national currencies. The Company
uses the U.S. dollar for financial reporting
purposes.
The Company translates assets and liabilities of its subsidiaries
outside the U.S. into U.S. dollars using the rate of exchange
prevailing at the fiscal year end, and the consolidated statements
of operations and comprehensive income or loss is translated at
average rates during the reporting period. Adjustments resulting
from the translation of the subsidiaries’ financial
statements from foreign currencies into U.S. dollars are recorded
in shareholders' equity as part of accumulated other comprehensive
gain - translation adjustments. Gains or losses resulting from
transactions denominated in currencies other than functional
currencies of the Company’s subsidiaries are reflected in
income for the reporting period.
Use of Estimates — The
preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Among the more
significant estimates included in these consolidated financial
statements are the estimated allowance for doubtful account
receivables, reserve for obsolete inventory, reserve for warranty,
impairments and the deferred income tax asset allowance. Actual
results could materially differ from those
estimates.
Revenue Recognition — The Company adopted ASU No. 2014-09, ASC
Topic 606, Revenue from Contracts with
Customers (“ASC Topic
606”). This standard update outlines a single comprehensive
model for entities to use in accounting for revenue arising from
contracts with customers.
We apply a five-step approach as defined in ASC Topic 606 in
determining the amount and timing of revenue to be recognized: (1)
identifying the contract with customer; (2) identifying the
performance obligations in the contracts; (3) determining the
transaction price; (4) allocating the transaction price to the
performance obligations in the contract; and (5) recognizing
revenue when the corresponding performance obligation is
satisfied.
Revenue derived from testing services is recognized when testing
services are rendered. Revenue generated from sale of products in
the manufacturing and distribution segments are recognized when
persuasive evidence of an arrangement exists, delivery of the
products has occurred, customer acceptance has been obtained (which
means the significant risks and rewards of ownership have been
transferred to the customer), the price is fixed or determinable
and collectability is reasonably assured. Certain customers can
request for installation and training services to be performed for
certain products sold in the manufacturing segment. These services
are mainly for helping customers with the test runs of the machines
sold and are considered a separate performance obligation. Such
services can be provided by other entities as well and these do not
significantly modify the product. The Company recognizes the
revenue at point in time when the Company has satisfied its
performance obligation.
In the real estate segment: (1) revenue from property development
is earned and recognized on the earlier of the dates when the
underlying property is sold or upon the maturity of the agreement;
if this amount is uncollectible, the agreement empowers the
repossession of the property, and (2) rental revenue is recognized
on a straight-line basis over the terms of the respective leases.
This means that, with respect to a particular lease, actual amounts
billed in accordance with the lease during any given period may be
higher or lower than the amount of rental revenue recognized for
the period. Straight-line rental revenue is commenced when the
tenant assumes possession of the leased premises. Accrued
straight-line rents receivable represents the amount by which
straight-line rental revenue exceeds rents currently billed in
accordance with lease agreements.
GST / Indirect Taxes — The Company’s policy is to
present taxes collected from customers and remitted to governmental
authorities on a net basis. The Company records the amounts
collected as a current liability and relieves such liability upon
remittance to the taxing authority without impacting revenues or
expenses.
Trade Account Receivables and Allowance for Doubtful Accounts
— During the normal course of business, the Company
extends unsecured credit to its customers in all segments.
Typically, credit terms require payment to be made between 30 to 90
days from the date of the sale. The Company generally does not
require collateral from our customers.
The
Company’s management considers the following factors when
determining the collectability of specific customer accounts:
customer creditworthiness, past transaction history with the
customer, current economic industry trends, and changes in customer
payment terms. The Company includes any account balances that are
determined to be uncollectible, along with a general reserve, in
the overall allowance for doubtful accounts. After all attempts to
collect a receivable have failed, the receivable is written off
against the allowance. Based on the information available to
management, the Company believed that its allowance for doubtful
accounts was adequate as of June 30, 2021 and 2020.
F-8
Warranty Costs — The Company provides for the
estimated costs that may be incurred under its warranty program at
the time the sale is recorded in its manufacturing segment. The
Company estimates warranty costs based on the historical rates of
warranty returns. The Company periodically assesses the adequacy of
its recorded warranty liability and adjusts the amounts as
necessary.
Cash and Cash Equivalents — The Company considers all
highly liquid investments with an original maturity of three months
or less when purchased to be cash equivalents.
Term Deposits — Term deposits consist of bank
balances and interest-bearing deposits having maturities of 3 to 6
months.
Restricted Term Deposits — The Company held certain term
deposits in the Singapore and Malaysia operations which were
considered restricted, as they were held as security against
certain facilities granted by the financial
institutions.
Inventories — Inventories in the Company’s
manufacturing and distribution segments, consisting principally of
raw materials, works in progress, and finished goods, are stated at
the lower of cost, using the first-in, first-out
(“FIFO”) method, or market value. The semiconductor
industry is characterized by rapid technological change, short-term
customer commitments and rapid fluctuations in demand. Provisions
for estimated excess and obsolete inventory are based on our
regular reviews of inventory quantities on hand and the latest
forecasts of product demand and production requirements from our
customers. Inventories are written down for not-saleable, excess or
obsolete raw materials, works-in-process and finished goods by
charging such write-downs to cost of sales. In addition to
write-downs based on newly introduced parts, statistics and
judgments are used for assessing provisions of the remaining
inventory based on salability and obsolescence.
Property, Plant and Equipment and Investment Properties
— Property, plant and equipment, and investment properties
are stated at cost, less accumulated depreciation and amortization.
Depreciation is provided for over the estimated useful lives of the
assets using the straight-line method. Amortization of leasehold
improvements is provided for over the lease terms or the estimated
useful lives of the assets, whichever is shorter, using the
straight-line method.
Maintenance,
repairs and minor renewals are charged directly to expense as
incurred. Additions and improvements to the assets are capitalized.
When assets are disposed of, the related cost and accumulated
depreciation thereon are removed from the accounts and any
resulting gain or loss is included in the consolidated statements
of operations and comprehensive income or loss.
Long-Lived Assets and Impairment – The Company’s
business requires heavy investment in manufacturing facilities and
equipment that are technologically advanced but can quickly become
significantly underutilized or rendered obsolete by rapid changes
in demand.
The
Company evaluates the long-lived assets, including property, plant
and equipment and investment property, for impairment whenever
events or changes in circumstances indicate that the carrying value
of such assets may not be recoverable. Factors considered important
that could result in an impairment review include significant
underperformance relative to expected historical or projected
future operating results, significant changes in the manner of use
of the assets or the strategy for our business, significant
negative industry or economic trends, and a significant decline in
the stock price for a sustained period of time. Impairment is
recognized based on the difference between the fair value of the
asset and its carrying value, and fair value is generally measured
based on discounted cash flow analysis, if there is significant
adverse change.
The
Company applies the provisions of ASC Topic 360, Accounting for the Impairment or Disposal of
Long-Lived Assets (“ASC Topic 360”), to
property, plant and equipment. ASC Topic 360 requires that
long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable through the estimated undiscounted
cash flows expected to result from the use and eventual disposition
of the assets. Whenever any such impairment exists, an impairment
loss will be recognized for the amount by which the carrying value
exceeds the fair value.
F-9
Leases - Company as Lessee
Accounting Standards Codification Topic 842 ("ASC Topic 842")
introduced new requirements to increase transparency and
comparability among organizations for
leasing transactions for both lessees and lessors. It requires a
lessee to record a right-of-use asset and a lease liability for all leases with terms longer
than 12 months. These leases will be either finance or operating,
with classification affecting the pattern of expense recognition.
The Company applies the guidance in ASC Topic 842 to its individual
leases of assets. When the Company receives substantially all of
the economic benefits from and directs the use of specified
property, plant and equipment, the transactions give rise to
leases. The Company’s classes of assets include real estate
leases.
Operating leases are included in operating lease right-of-use
("ROU") assets under the noncurrent asset portion of our
consolidated balance sheets and under this current portion and
noncurrent liabilities portion of our consolidated
balance sheets. ROU assets represent
our right to use an underlying asset for the lease term and lease
liabilities represent our obligation to make lease
payments arising from the related
lease. Finance leases are included in property, plant and equipment
under the noncurrent asset portion of our consolidated balance
sheets and under the current portion and noncurrent liabilities
portion of our consolidated balance sheets.
The
Company has elected the practical expedient within ASC Topic 842 to not separate lease and
non-lease components within lease transactions for all classes of
assets. Additionally, the Company has elected the short-term lease
exception for all classes of assets, does not apply the recognition
requirements for leases of 12 months or less, and recognizes lease
payments for short-term leases as expense either straight-line over
the lease term or as incurred depending on whether the lease
payments are fixed or variable. These elections are applied
consistently for all leases.
As part of applying the transition method, the Company has elected
to apply the package of transition practical expedients within the
new guidance. As required by the new standard, these expedients
have been elected as a package and are consistently applied across
the Company’s lease portfolio. Given this election, the
Company need not reassess:
●
whether
any expired or existing contracts are or contain
leases;
●
the
lease classification for any expired or existing
leases;
●
treatment
of initial direct costs relating to any existing
leases.
When discount rates implicit in leases cannot be readily
determined, the Company uses the applicable incremental borrowing
rate at lease commencement to perform lease classification tests on lease
components and to measure lease liabilities and ROU assets. The
incremental borrowing rate used by the Company was based on baseline rates and adjusted by the
credit spreads commensurate with the Company’s secured
borrowing rate over a similar term. At each reporting period when
there is a new lease initiated, the rates established for that quarter will be
used.
Leases - Company as Lessor
All of the leases under which the Company is the lessor will
continue to be classified as operating leases and sales-type lease
under the new standard The new standard did not have a material
effect on our consolidated financial statements and will not have a
significant change in our leasing activities.
Comprehensive Income or Loss — ASC Topic 220, Reporting Comprehensive
Income, (“ASC Topic
220”), establishes standards for reporting and
presentation of comprehensive income or loss and its components in
a full set of general-purpose consolidated financial statements.
The Company has chosen to report comprehensive income or loss in
the statements of operations. Comprehensive income or loss is
comprised of net income or loss and all changes to
shareholders’ equity except those due to investments by
owners and distributions to owners.
Income Taxes — The
Company accounts for income taxes using the liability method in
accordance with ASC Topic 740, Accounting for Income
Taxes (“ASC Topic
740”). ASC Topic 740 requires an entity to recognize
deferred tax liabilities and assets. Deferred tax assets and
liabilities are recognized for the future tax consequence
attributable to the difference between the tax bases of assets and
liabilities and their reported amounts in the consolidated
financial statements, which will result in taxable or deductible
amounts in future years. Further, the effects of enacted tax laws
or rate changes are included as part of deferred tax expenses or
benefits in the period that covers the enactment
date.
The
calculation of tax liabilities involves dealing with uncertainties
in the application of complex global tax regulations. The Company
recognizes potential liabilities for anticipated tax audit issues
in the U.S. and other tax jurisdictions based on its estimate of
whether, and the extent to which, additional taxes will be due. If
payment of these amounts ultimately proves to be unnecessary, the
reversal of the liabilities would result in tax benefits being
recognized in the period when the Company determines the
liabilities are no longer necessary. If the estimate of tax
liabilities proves to be less than the ultimate assessment, a
further charge to expense would result.
F-10
Retained Earnings — It is
the intention of the Company to reinvest earnings of its foreign
subsidiaries in the operations of those subsidiaries. These taxes
are undeterminable at this time. The amount of earnings retained in
subsidiaries was $16,683 and $15,585 at June 30, 2021 and 2020,
respectively.
Research and Development Costs — The Company incurred research and development
costs of $357 and $355 in fiscal year 2021 and in fiscal year 2020,
respectively, which were charged to operating expenses as
incurred.
Stock-based compensation — The Company calculates
compensation expense related to stock option awards made to
employees and directors based on the fair value of stock-based
awards on the date of grant. The Company determines the grant date
fair value of our stock option awards using the Black-Scholes
option pricing model and for awards without performance condition
the related stock-based compensation is recognized over the period
in which a participant is required to provide service in exchange
for the stock-based award, which is generally four years. The
Company recognizes stock-based compensation expense in the
consolidated statements of shareholders' equity based on awards
ultimately expected to vest. Forfeitures are estimated on the date
of grant and revised if actual or expected forfeiture activity
differs materially from original estimates.
Determining
the fair value of stock-based awards at the grant date requires
significant judgement. The determination of the grant date fair
value of stock-based awards using the Black-Scholes option-pricing
model is affected by our estimated common stock fair value as well
as other subjective assumptions including the expected term of the
awards, the expected volatility over the expected term of the
awards, expected dividend yield and risk-free interest rates. The
assumptions used in our option-pricing model represent
management’s best estimates and are as follows:
●
Fair
Value of Common Stock. We determined the fair value of each share
of underlying common stock based on the closing price of our common
stock on the date of grant.
●
Expected
Term. The expected term of employee stock options reflects the
period for which we believe the option will remain outstanding
based on historical experience and future
expectations.
●
Expected
Volatility. We base expected volatility on our historical
information over a similar expected term.
Earnings per Share — Computation of basic earnings per share is
conducted by dividing net income available to common shares
(numerator) by the weighted average number of common shares
outstanding (denominator) during a reporting period. Computation of
diluted earnings per share gives effect to all dilutive potential
common shares outstanding during a reporting period. In computing
diluted earnings per share, the average market price of common
shares for a reporting period is used in determining the number of
shares assumed to be purchased from the exercise of stock
options.
Fair Values of Financial Instruments — Carrying values of trade account
receivables, accounts payable, accrued expenses, and term deposits
approximate their fair value due to their short-term maturities.
Carrying values of the Company’s lines of credit and
long-term debt are considered to approximate their fair value
because the interest rates associated with the lines of credit and
long-term debt are adjustable in accordance with market situations
when the Company tries to borrow funds with similar terms and
remaining maturities. See Note 16 for detailed discussion of the
fair value measurement of financial
instruments.
ASC
Topic 820 defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The financial assets and financial liabilities that require
recognition under the guidance include available-for-sale
investments, employee deferred compensation plan and foreign
currency derivatives. The guidance establishes a hierarchy for
inputs used in measuring fair value that maximizes the use of
observable inputs and minimizes the use of unobservable inputs by
requiring that the observable inputs be used when available.
Observable inputs are inputs that market participants would use in
pricing the asset or liability developed based on market data
obtained from sources independent of us. Unobservable inputs are
inputs that reflect our assumptions about the assumptions market
participants would use in pricing the asset or liability developed
based on the best information available under the circumstances. As
such, fair value is a market-based measure considered from the
perspective of a market participant who holds the asset or owes the
liability rather than an entity-specific measure. The hierarchy is
broken down into three levels based on the reliability of inputs as
follows:
●
Level
1—Valuations based on quoted prices in active markets for
identical assets or liabilities that we have the ability to access.
Since valuations are based on quoted prices that are readily and
regularly available in an active market, valuation of these
products does not entail a significant degree of judgment.
Financial assets utilizing Level 1 inputs include U.S. treasuries,
most money market funds, marketable equity securities and our
employee deferred compensation plan;
●
Level
2—Valuations based on quoted prices in markets that are not
active or for which all significant inputs are observable, directly
or indirectly. Financial assets and liabilities utilizing Level 2
inputs include foreign currency forward exchange contracts, most
commercial paper and corporate notes and bonds; and
●
Level
3—Valuations based on inputs that are unobservable and
significant to the overall fair value measurement.
F-11
Concentration of Credit Risk — Financial instruments
that subject the Company to credit risk compose trade account
receivables. The Company performs ongoing credit evaluations of its
customers for potential credit losses. The Company generally does
not require collateral. The Company believes that its credit
policies do not result in significant adverse risk and historically
it has not experienced significant credit related
losses.
Investments —The Company (a) evaluates the sufficiency
of the total equity at risk, (b) reviews the voting rights and
decision-making authority of the equity investment holders as a
group, and whether there are any guaranteed returns, protection
against losses, or capping of residual returns within the group,
and (c) establishes whether activities within the venture are on
behalf of an investor with disproportionately few voting rights in
making this VIE determination. The Company would consolidate an
investment that is determined to be a VIE if it was the primary
beneficiary. The primary beneficiary of a VIE is determined by a
primarily qualitative approach, whereby the variable interest
holder, if any, has the power to direct the VIE’s most
significant activities and is the primary beneficiary. A new
accounting standard became effective and changed the method by
which the primary beneficiary of a VIE is determined. Through a
primarily qualitative approach, the variable interest holder, who
has the power to direct the VIE’s most significant activities
is determined to be the primary beneficiary. To the extent that the
investment does not qualify as VIE, the Company further assesses
the existence of a controlling financial interest under a voting
interest model to determine whether the investment should be
consolidated.
Equity Method — The Company analyzes its investments
to determine if they should be accounted for using the equity
method. Management evaluates both Common Stock and in-substance
Common Stock to determine whether they give the Company the ability
to exercise significant influence over operating and financial
policies of the investment even though the Company holds less than
50% of the Common Stock and in-substance Common Stock. The net
income of the investment, if any, will be reported as “Equity
in earnings of unconsolidated joint ventures, net of tax” in
the Company’s consolidated statements of operations and
comprehensive income.
Cost Method — Investee companies not accounted
for under the consolidation or the equity method of accounting are
accounted for under the cost method of accounting. Under this
method, the Company’s share of the earnings or losses of such
Investee companies is not included in the consolidated balance
sheet or statements of operations and comprehensive income or loss.
However, impairment charges are recognized in the consolidated
statements of operations and comprehensive income or loss. If
circumstances suggest that the value of the investee Company has
subsequently recovered, such recovery is not recorded.
Loan Receivables from Property Development Projects —
The loan receivables from property development projects are
classified as current asset, carried at face value, and are
individually evaluated for impairment. The allowance for loan
losses reflects management’s best estimate of probable losses
determined principally on the basis of historical experience and
specific allowances for known loan accounts. All loans or portions
thereof deemed to be uncollectible or to require an excessive
collection cost are written off to the allowance for
losses.
Interest
income on the loan receivables from property development projects
are recognized on an accrual basis. Discounts and premiums on loans
are amortized to income using the interest method over the
remaining period to contractual maturity. The amortization of
discounts into income is discontinued on loans that are
contractually 90 days past due or when collection of interest
appears doubtful.
Contingent Liabilities — Certain conditions may exist
as of the date the consolidated financial statements are issued,
which may result in a loss to the Company, but which will only be
resolved when one or more future events occur or fail to occur. The
Company’s management and its legal counsel assess such
contingent liabilities, and such assessment inherently involves an
exercise of judgment. In assessing loss contingencies related to
legal proceedings that are pending against the Company or
unasserted claims that may result in such proceedings, the
Company’s legal counsel evaluates the perceived merits of any
legal proceedings or unasserted claims, as well as the perceived
merits of the amount of relief sought or expected to be sought
therein.
If the
assessment of a contingency indicates that it is probable that a
material loss has been incurred and the amount of the liability can
be estimated, then the estimated liability would be accrued in the
Company’s consolidated financial statements. If the
assessment indicates that a potentially material loss contingency
is not probable, but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability,
together with an estimate of the range of possible loss if
determinable and material, would be disclosed.
Loss
contingencies considered remote are generally not disclosed unless
they involve guarantees, in which case the nature of the guarantee
would be disclosed.
F-12
2. RESTATEMENTS
During
the preparation of the Annual Report on Form 10-K for the year
ended June 30, 2021, the Company has discovered errors in the
accounting treatment of expensing stock option issued to the
Company’s directors and employees from fiscal year 2016 to
2020 under FASB ASC Topic 718, Compensation – Stock
Compensation, which resulted in misstatements in its
previously issued consolidated financial statements for the years
ended June 30, 2016 to June 30, 2020. The Company has amended and
restated its 2020 consolidated financial statements to accumulated
retained earnings by $621 and its additional paid-in-capital by
$621 as of June 30, 2020. The Company has also increased its
general and administrative expenses by $88 for the year ended June
30, 2020. As a result, the Company has restated its consolidated
financial statements in accordance with ASC 250, Accounting Changes and Error
Corrections (the “restated consolidated financial
statements”). There is no tax impact implications resulted
from the restatement.
The
impact of the restatement on the consolidated financial statements
as previously reported is summarized below:
|
|
For
the year ended June 30, 2020
(as
previously reported)
|
For
the year ended June 30, 2020
(Restated)
|
|
CONSOLIDATED
BALANCE SHEETS (IN THOUSANDS, EXCEPT NUMBER OF SHARES)
|
|
|
|
Paid-in
capital
|
3,363
|
3,984
|
|
Accumulated
retained earnings
|
8,036
|
7,415
|
|
Total Trio-tech
International shareholders' equity
|
23,966
|
23,966
|
|
TOTAL
EQUITY
|
25,146
|
25,146
|
|
|
For
the year ended June 30, 2020
(as
previously reported)
|
For
the year ended June 30, 2020
(Restated)
|
|
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS EQUITY
|
|
|
|
Accumulated
retained earnings
|
$8,036
|
$7,415
|
|
Paid-in
capital
|
3,363
|
3,984
|
|
|
For
the year ended June 30, 2020
(as
previously reported)
|
For
the year ended June 30, 2020
(Restated)
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
|
|
|
|
General and
administrative expenses
|
$6,976
|
$7,064
|
|
Total operating
expenses
|
8,125
|
8,213
|
|
Loss from
operation
|
(859)
|
(947)
|
|
Income from
Continuing Operations before Income Taxes
|
1,195
|
1,107
|
|
Income from
continuing operations before non-controlling interests, net of
tax
|
1,207
|
1,119
|
|
NET
INCOME
|
1,204
|
1,116
|
|
Net Income
Attributable to Trio-Tech International Common
Shareholders
|
966
|
878
|
|
Basic
Earnings per Share:
|
|
|
|
Basic earnings per
share from continuing operations attributable to Trio-Tech
International
|
0.26
|
0.24
|
|
|
|
|
|
Diluted
Earnings per Share:
|
|
|
|
Diluted earnings
per share from continuing operations attributable to Trio-Tech
International
|
0.26
|
0.24
|
F-13
3. NEW ACCOUNTING PRONOUNCEMENTS
In
August 2020, the FASB issued ASU 2020-06: Debt – Debt with Conversion and Other
Options (Subtopic 470-20) and Derivative and Hedging –
Contracts in Entity’s Own Equity (Subtopic 815-40).
This ASU reduces the number of accounting models for convertible
debt instruments and convertible preferred stock as well as amend
the guidance for the derivatives scope exception for contracts in
an entity’s own equity to reduce form-over-substance-based
accounting conclusion. In addition, this ASU improves and amends
the related EPS guidance. These amendments are effective for the
Company for fiscal years beginning after December 15, 2023,
including interim periods within those fiscal years. Early adoption
is permitted, but no earlier than fiscal years beginning after
December 15, 2020, including interim periods within those fiscal
years. Adoption is either a modified retrospective method or a
fully retrospective method of transition. The Company has completed
its assessment and concluded that this update has no significant
impact to the Company’s consolidated financial
statements.
In March 2020, FASB issued ASU 2020-04 ASC Topic 848:
Reference Rate
Reform: Facilitation of the Effects of Reference Rate Reform on
Financial Reporting, which
provides optional expedients and exceptions for applying U.S. GAAP
to contracts, hedging relationships and other transactions affected
by the discontinuation of the London Interbank Offered Rate
(“LIBOR”) or by another reference rate expected to be
discontinued. The amendments are effective for all entities as of
March 12, 2020, and the Company may elect to apply the amendments
prospectively through December 31, 2022. The Company has completed
its assessment and concluded that this update has no significant
impact to the Company’s consolidated financial
statements..
The amendments in ASU 2019-12 ASC Topic 740: Income Taxes: Simplifying
Accounting for Income Taxes remove specific exceptions to the general
principles in Topic 740 in Generally Accepted Accounting Principles
(GAAP). The amendments eliminate the need for an organization to
analyze whether the specific exceptions apply in a given period,
improve financial statement preparers’ application of income
tax-related guidance and simplify GAAP. The amendments are
effective for all entities for fiscal years beginning after
December 15, 2020 and interim periods within those fiscal years.
The effectiveness of this update is not expected to have a
significant effect on the Company’s consolidated financial
position or results of operations.
In June 2016, FASB issued ASU 2016-13 ASC Topic 326:
Financial
Instruments — Credit Losses (“ASC Topic 326”) for the measurement
of all expected credit losses for financial assets held at the
reporting date based on historical experience, current conditions,
and reasonable and supportable forecasts. Financial institutions
and other organizations will now use forward-looking information to
better inform their credit loss estimates. Many of the loss
estimation techniques applied today will still be permitted,
although the inputs to those techniques will change to reflect the
full amount of expected credit losses. ASC Topic 326 is effective
for the Company for annual periods beginning after December 15,
2022. The Company has completed its assessment and concluded that
this update has no significant impact to the Company’s
consolidated financial statements..
Other new pronouncements issued but not yet effective until after
June 30, 2021 are not expected to have a significant effect on the
Company’s consolidated financial position or results of
operations.
4. TERM DEPOSITS
|
|
June
30,
2021
|
June
30,
2020
|
|
|
|
|
|
Short-term
deposits
|
$6,353
|
$7,028
|
|
Currency
translation effect on short-term deposits
|
298
|
(190)
|
|
Total
short-term deposits
|
6,651
|
6,838
|
|
Restricted term
deposits
|
1,682
|
1,712
|
|
Currency
translation effect on restricted term deposits
|
59
|
(52)
|
|
Total
restricted term deposits
|
1,741
|
1,660
|
|
Total
term deposits
|
$8,392
|
$8,498
|
Restricted deposits represent the amount of cash pledged to secure
loans payable granted by financial institutions and serve as
collateral for public utility agreements such as electricity and
water and performance bonds related to customs duty payable.
Restricted term deposits are classified as noncurrent assets, as
they relate to long-term obligations and will become unrestricted
only upon discharge of the obligations. Short-term deposits
represent bank deposits, which do not qualify as cash
equivalents.
F-14
5. TRADE ACCOUNT RECEIVABLES
AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
Account
receivables are customer obligations due under normal trade terms.
The Company performs continuing credit evaluations of its
customers’ financial conditions, and although management
generally does not require collateral, letters of credit may be
required from its customers in certain circumstances.
Senior
management reviews trade account receivables on a periodic basis to
determine if any receivables will potentially be uncollectible.
Management includes any trade account receivables balances that are
determined to be uncollectible in the allowance for doubtful
accounts. After all attempts to collect a receivable have failed,
the receivable is written off against the allowance. Based on
the information available to us, management believed the allowance
for doubtful accounts as of June 30, 2021 and June 30, 2020, was
adequate.
The
following table represents the changes in the allowance for
doubtful accounts:
|
|
For
the Year Ended
June
30,
|
|
|
|
2021
|
2020
|
|
Beginning
|
$314
|
$263
|
|
Additions charged
to expenses
|
5
|
351
|
|
Recovered
|
(14)
|
(284)
|
|
Write-off
|
(16)
|
(9)
|
|
Currency
translation effect
|
22
|
(7)
|
|
Ending
|
$311
|
$314
|
6. LOANS RECEIVABLE FROM PROPERTY DEVELOPMENT PROJECTS
The
following table presents Trio-Tech (Chongqing) Co. Ltd
(“TTCQ”)’s loan receivable from property
development projects in China as of June 30, 2021.
|
|
Loan Expiry
|
|
Loan Amount
|
|
|
Loan Amount
|
|
||
|
|
Date
|
|
(RMB)
|
|
|
(U.S. Dollars)
|
|
||
|
Short-term loan receivables
|
|
|
|
|
|
|
|
||
|
JiangHuai
(Project - Yu Jin Jiang An)
|
May 31,
2013
|
|
|
2,000
|
|
|
|
309
|
|
|
Less:
allowance for doubtful receivables
|
|
|
|
(2,000
|
)
|
|
|
(309
|
)
|
|
Net loan receivable from property development projects
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term loan receivables
|
|
|
|
|
|
|
|
||
|
Jun
Zhou Zhi Ye
|
Oct 31,
2016
|
|
|
5,000
|
|
|
|
773
|
|
|
Less:
transfer – down payment for purchase of investment
property
|
|
|
|
(5,000
|
)
|
|
|
(773
|
)
|
|
Net loan receivable from property development projects
|
|
|
|
-
|
|
|
|
-
|
|
The
short-term loan receivables of renminbi (“RMB”) 2,000,
or approximately $309, arose due to TTCQ entering into a Memorandum
Agreement with JiangHuai Property Development Co. Ltd.
(“JiangHuai”) to invest in their property development
projects (Project - Yu Jin Jiang An) located in Chongqing City,
China in fiscal 2011. TTCQ did not generate other income from
JiangHuai for the fiscal year ended June 30, 2021 and June 30,
2020. TTCQ is in the legal process of recovering the outstanding
amount of $309.
The
long-term loan receivable of RMB 5,000, or approximately $773,
arose from TTCQ entering into a Memorandum Agreement with JiaSheng
Property Development Co. Ltd. (“JiaSheng”) to invest in
JiaSheng’s property development projects (Project B-48 Phase
2) located in Chongqing City, China in fiscal 2011. The loan
receivable was secured and repayable at the end of the term. The
book value of the loan receivable approximates its fair value.
During fiscal year 2015, the loan receivable was transferred to
down payment for purchase of investment property that is being
developed in the Singapore Themed Resort Project (See Note
10).
F-15
7. INVENTORIES
Inventories
consisted of the following:
|
|
For
the Year Ended
June
30,
|
|
|
|
2021
|
2020
|
|
|
|
|
|
Raw
materials
|
$1,152
|
$1,281
|
|
Work in
progress
|
1,218
|
968
|
|
Finished
goods
|
325
|
422
|
|
Less: provision for
obsolete inventories
|
(679)
|
(678)
|
|
Currency
translation effect
|
64
|
(71)
|
|
|
$2,080
|
$1,922
|
The
following table represents the changes in provision for obsolete
inventories:
|
|
For
the Year Ended
June
30,
|
|
|
|
2021
|
2020
|
|
|
|
|
|
Beginning
|
$678
|
$673
|
|
Additions charged
to expenses
|
13
|
26
|
|
Usage -
disposition
|
(28)
|
(8)
|
|
Currency
translation effect
|
16
|
(13)
|
|
Ending
|
$679
|
$678
|
F-16
8. INVESTMENT
PROPERTIES
The
following table presents the Company’s investment in
properties in China as of June 30, 2021. The exchange rate is based
on the market rate as of June 30, 2021.
|
|
Investment
Date
/ Reclassification Date
|
Investment
Amount (RMB)
|
Investment
Amount
(U.S. Dollars)
|
|
Purchase of rental
property – Property I – MaoYe Property
|
Jan 04,
2008
|
5,554
|
894
|
|
Currency
translation
|
|
-
|
(87)
|
|
Reclassification as
“Assets held for sale”
|
July 01,
2018
|
(5,554)
|
(807)
|
|
Reclassification
from “Assets held for sale”
|
Mar 31,
2019
|
2,024
|
301
|
|
|
2,024
|
301
|
|
|
Purchase
of rental property – Property II -
JiangHuai
|
Jan 06,
2010
|
3,600
|
580
|
|
Purchase
of rental property – Property III - FuLi
|
Apr 08,
2010
|
4,025
|
648
|
|
Currency
translation
|
|
-
|
(36)
|
|
Gross investment in
rental property
|
|
9,649
|
1,493
|
|
Accumulated
depreciation on rental property
|
June 30,
2021
|
(7,040)
|
(1,079)
|
|
Reclassified as
“Assets held for sale”
|
July 01,
2018
|
2,822
|
410
|
|
Reclassification
from “Assets held for sale”
|
Mar 31,
2019
|
(1,029)
|
(143)
|
|
|
(5,247)
|
(812)
|
|
|
Net
investment in property – China
|
|
4,402
|
681
|
The
following table presents the Company’s investment in
properties in China as of June 30, 2020. The exchange rate is based
on the market rate as of June 30, 2020.
|
|
Investment
Date
/ Reclassification Date
|
Investment
Amount (RMB)
|
Investment
Amount
(U.S. Dollars)
|
|
Purchase of rental
property – Property I – MaoYe Property
|
Jan 04,
2008
|
5,554
|
894
|
|
Currency
translation
|
|
-
|
(87)
|
|
Reclassification as
“Assets held for sale”
|
July 01,
2018
|
(5,554)
|
(807)
|
|
Reclassification
from “Assets held for sale”
|
Mar 31,
2019
|
2,024
|
301
|
|
|
2,024
|
301
|
|
|
Purchase
of rental property – Property II -
JiangHuai
|
Jan 06,
2010
|
3,600
|
580
|
|
Purchase
of rental property – Property III - FuLi
|
Apr 08,
2010
|
4,025
|
648
|
|
Currency
translation
|
|
-
|
(166)
|
|
Gross investment in
rental property
|
|
9,649
|
1,363
|
|
Accumulated
depreciation on rental property
|
June 30,
2020
|
(6,558)
|
(940)
|
|
Reclassified as
“Assets held for sale”
|
July 01,
2018
|
2,822
|
410
|
|
Reclassification
from “Assets held for sale”
|
Mar 31,
2019
|
(1,029)
|
(143)
|
|
|
(4,765)
|
(673)
|
|
|
Net
investment in property – China
|
|
4,884
|
690
|
Rental Property I - MaoYe Property
In
fiscal 2008, TTCQ purchased an office in Chongqing, China from
MaoYe Property Ltd. (“MaoYe”) for a total cash purchase
price of RMB 5,554, or approximately $894. During the fiscal year
2019, the Company sold thirteen of the fifteen units constituting
the MaoYe Property. Management has decided not to sell the
remaining two units of MaoYe properties in the near future,
considering the market conditions in China. These properties are
vacant as of June 30, 2021, since the last lease agreement expired
in March 2021. A new lease agreement had subsequently been signed
in September 2021 at a monthly rate of RMB14, or approximately $2,
commencing from September 1, 2021 to February 28,
2022.
Property
purchased from MaoYe generated a rental income of $9 and $32 for
the years ended June 30, 2021 and 2020, respectively.
Depreciation
expense for MaoYe was $15 and $13 for the years ended June 30, 2021
and 2020, respectively.
F-17
Rental Property II - JiangHuai
In
fiscal year 2010, TTCQ purchased eight units of commercial property
in Chongqing, China from Chongqing JiangHuai Real Estate
Development Co. Ltd. (“JiangHuai”) for a total purchase
price of RMB 3,600, or approximately $580. TTCQ had yet to receive
the title deed for these properties. TTCQ was in the legal process
of obtaining the title deed until the developer encountered cash
flow difficulties in the recent years. Since then, JiangHuai
company is under liquidation and is now undergoing asset
distribution. Nonetheless, this is not expected to affect the
property’s market value but, in view of the COVID-19 pandemic
and current economic situation, it is likely to be more tedious and
time-consuming for the Court in their execution of the
sale.
Property
purchased from JiangHuai did not generate any rental income for
both the years ended June 30, 2021 and 2020.
Depreciation
expense for JiangHuai was $27 and $26 for the years ended June 30,
2021 and 2020, respectively.
Rental Property III – FuLi
In
fiscal 2010, TTCQ entered into a Memorandum Agreement with
Chongqing FuLi Real Estate Development Co. Ltd.
(“FuLi”) to purchase two commercial properties totaling
311.99 square meters (“office space”) located in Jiang
Bei District Chongqing. The total purchase price committed and paid
was RMB 4,025, or approximately $648. The development was
completed, and the property was handed over to TTCQ in April 2013
and the title deed was received during the third quarter of fiscal
2014.
One of
the two commercial properties were leased by TTCQ by a third party
under a two years lease to rent out the 154.49 square meter at a
monthly rate of RMB9, or approximately $1, commencing from May 21,
2021 to May 23, 2023.
For the
other leased property, TTCQ renewed the lease agreement to rent out
the 161 square meter space at a monthly rate of RMB10, or
approximately $1, from November 1, 2019 to October 31, 2020. After
which, TTCQ renewed the lease agreement at a monthly rate of RMB10,
or approximately $1, from November 1, 2020 to April 30, 2021 and
May 1, 2021 to October 31, 2021.
Properties
purchased from FuLi generated a rental income of $19 and $30 for
the years ended June 30, 2021 and 2020, respectively.
Depreciation
expense for FuLi was $30 and $28 for the years ended June 30, 2021
and 2020, respectively.
Summary
Total
rental income for all investment properties in China was $28 for
the year ended June 30, 2021, and $62 for the same period in the
prior fiscal year.
Depreciation
expenses for all investment properties in China were $72 and $67
for the years ended June 30, 2021 and 2020,
respectively.
F-18
9. PROPERTY, PLANT AND EQUIPMENT
Property, plant and
equipment consisted of the following:
|
|
Estimated Useful Life
in Years
|
June 30,
2021
|
June 30,
2020
|
|
Building and
improvements
|
3-20
|
$5,141
|
$5,102
|
|
Leasehold
improvements
|
3-27
|
6,174
|
6,170
|
|
Machinery and
equipment
|
3-7
|
26,804
|
26,578
|
|
Furniture and
fixtures
|
3-5
|
1,170
|
1,134
|
|
Equipment under
finance leases
|
3-5
|
1,413
|
1,066
|
|
Property, plant and
equipment, gross
|
|
$40,702
|
$40,050
|
|
Less: accumulated
depreciation
|
|
(28,751)
|
(27,148)
|
|
Accumulated
amortization on equipment under finance leases
|
(1,199)
|
(719)
|
|
|
Total accumulated
depreciation
|
$(29,950)
|
$(27,867)
|
|
|
Property, plant and
equipment before currency translation effect, net
|
10,752
|
12,183
|
|
|
Currency
translation effect
|
(1,221)
|
(1,873)
|
|
|
Property,
plant and equipment, net
|
$9,531
|
$10,310
|
Depreciation
and amortization expenses for property, plant and equipment during
fiscal years 2021 and 2020 were $2,419 and $2,341,
respectively.
10. OTHER ASSETS
|
|
June
30,
|
June
30,
|
|
|
2021
|
2020
|
|
|
|
|
|
Down payment for
purchase of investment properties*
|
$-
|
$1,645
|
|
Down payment for
purchase of property, plant and equipment
|
372
|
8
|
|
Deposits for rental
and utilities and others
|
160
|
171
|
|
Currency
translation effect
|
(270)
|
(215)
|
|
Total
|
$262
|
$1,609
|
*Down
payment for purchase of investment properties
included:
|
|
RMB
|
U.S.
Dollars
|
|
Original Investment
(10% of Junzhou equity)
|
$10,000
|
$1,606
|
|
Less: Management
Fee
|
(5,000)
|
(803)
|
|
Net
Investment
|
5,000
|
803
|
|
Less: Share of Loss
on Joint Venture
|
(137)
|
(22)
|
|
Net
Investment as Down Payment (Note *a)
|
4,863
|
781
|
|
Loans
Receivable
|
5,000
|
814
|
|
Interest
Receivable
|
1,250
|
200
|
|
Less: Impairment of
Interest
|
(906)
|
(150)
|
|
Transferred
to Down Payment (Note *b)
|
5,344
|
864
|
|
*
Down Payment for Purchase of Investment Properties
|
10,207
|
1,645
|
|
Less:
Provision of Impairment loss on other assets
|
(10,207)
|
(1,645)
|
|
Down
Payment for Purchase of Investment Properties
|
-
|
-
|
F-19
a) On
December 2, 2010, the Company signed a Joint Venture agreement
(“agreement”) with Jia Sheng Property Development Co.
Ltd. (“Developer”) to form a new company, Junzhou Co.
Limited (“Joint Venture” or “Junzhou”), to
jointly develop the “Singapore Themed Park” project
(the “project”). The Company paid RMB10 million for the
10% investment in the joint venture. The Developer paid the Company
a management fee of RMB 5 million in cash upon signing of the
agreement, with a remaining fee of RMB 5 million payable upon
fulfilment of certain conditions in accordance with the agreement.
The Company further reduced its investment by RMB 137, or
approximately $22, through the losses from operations incurred by
the Joint Venture.
On
October 2, 2013, the Company disposed of its entire 10% interest in
the Joint Venture but to date has not received payment in full
therefor. The Company recognized that disposal based on the
recorded net book value of RMB 5 million, or equivalent to $803K,
from net considerations paid, in accordance with GAAP under ASC
Topic 845 Non-monetary
Consideration. It is presented under “Other
Assets” as noncurrent assets to defer the recognition of the
gain on the disposal of the 10% interest in the joint venture
investment until such time that the consideration is paid, so that
the gain can be ascertained.
b)
Amounts of RMB 5,000, or approximately $773, as disclosed in Note
6, plus the interest receivable on long term loan receivable of RMB
1,250, or approximately $200, and impairment on interest of RMB
906, or approximately $150.
The
shop lots in the Singapore Themed Resort Project being developed by
the Developer under the agreement are to be delivered to TTCQ upon
completion thereof. The initial targeted date of completion was
December 31, 2016. Based on discussion with the Developer, the
completion date is currently estimated to be December 31, 2022. The
delay was primarily due to the time needed by the Developer to work
with various parties to inject sufficient funds into this project,
especially during the COVID-19 pandemic.
During the fourth quarter of 2021, The Company accrued an
impairment charge of $1,580 related to the doubtful recovery of the
down payment on shop lots in the Singapore Theme Resort Project in
Chongging, China. The Company elected to take this non-cash
impairment charge because of increased uncertainties regarding the
project’s viability given the developers weakening financial
condition as well as uncertainties arising from the negative
real-estate environment in China, implementation of control
measures on real-estate lending and its relevant government
policies, together with effects of the ongoing
pandemic.
11. LINES OF CREDIT
The carrying value of the Company’s lines of credit
approximates its fair value, because the interest rates associated
with the lines of credit are adjustable in accordance with market
situations when the Company borrowed funds with similar terms and
remaining maturities.
The
Company’s credit rating provides it with readily and adequate
access to funds in global markets.
As of
June 30, 2021, the Company had certain lines of credit that are
collateralized by restricted deposits.
|
Entity
with
|
Type
of
|
Interest
|
Expiration
|
Credit
|
Unused
|
|
Facility
|
Facility
|
Rate
|
Date
|
Limitation
|
Credit
|
|
Trio-Tech
International Pte. Ltd., Singapore
|
Lines of
Credit
|
Ranging from 1.85%
to 5.5%, SIBOR rate +1.2% and LIBOR rate +1.25%
|
-
|
$4,237
|
$4,237
|
|
Universal (Far
East) Pte. Ltd., Singapore
|
Lines of
Credit
|
Ranging from 1.85%
to 5.5%
|
-
|
$1,115
|
$1,043
|
|
Trio-Tech Malaysia
Sdn. Bhd., Malaysia
|
Revolving
Credit
|
Cost of Funds Rate
+2%
|
-
|
$361
|
$361
|
As of
June 30, 2020, the Company had certain lines of credit that are
collateralized by restricted deposits.
|
Entity
with
|
Type
of
|
Interest
|
Expiration
|
Credit
|
Unused
|
|
Facility
|
Facility
|
Rate
|
Date
|
Limitation
|
Credit
|
|
Trio-Tech
International Pte. Ltd., Singapore
|
Lines of
Credit
|
Ranging from 1.85%
to 5.5%, SIBOR rate +1.25% and LIBOR rate +1.30%
|
-
|
$4,806
|
$4,806
|
|
Universal (Far
East) Pte. Ltd., Singapore
|
Lines of
Credit
|
Ranging from 1.85%
to 5.5%
|
-
|
$359
|
$187
|
|
Trio-Tech Malaysia
Sdn. Bhd., Malaysia
|
Revolving
Credit
|
Cost of Funds Rate
+2%
|
-
|
$350
|
$350
|
On
November 18, 2019, Trio-Tech International Pte. Ltd. signed an
agreement with JECC Leasing (Singapore) Pte. Ltd. for an Account
Receivables Financing facility for SGD 1,000, or approximately $742
based on the market exchange rate. Interest is charged at LIBOR
rate +1.3% for USD financing and SIBOR rate +1.25% for SGD
financing. The financing facility was set up to facilitate the
working capital in our operations in Singapore. The Company started
to use this facility in the second quarter of fiscal year
2020.
F-20
12. ACCRUED
EXPENSES
|
Accrued expenses
consisted of the following:
|
For
the Year Ended June 30,
|
|
|
|
2021
|
2020
(Restated)
|
|
|
|
|
|
Payroll and related
costs
|
1,362
|
1,185
|
|
Commissions
|
51
|
104
|
|
Customer
deposits
|
45
|
30
|
|
Legal and
audit
|
321
|
315
|
|
Sales
tax
|
9
|
19
|
|
Utilities
|
91
|
80
|
|
Warranty
|
14
|
12
|
|
Accrued purchase of
materials and property, plant and equipment
|
144
|
186
|
|
Provision for
reinstatement
|
290
|
300
|
|
Deferred
income
|
67
|
88
|
|
Contract
liabilities
|
628
|
476
|
|
Other accrued
expenses
|
279
|
287
|
|
Currency
translation effect
|
62
|
(77)
|
|
Total
|
$3,363
|
$3,005
|
13. WARRANTY ACCRUAL
The
Company provides for the estimated costs that may be incurred under
its warranty program at the time the sale is recorded. The warranty
period for products manufactured by the Company is generally one
year or the warranty period agreed upon with the customer. The
Company estimates the warranty costs based on the historical rates
of warranty returns. The Company periodically assesses the
adequacy of its recorded warranty liability and adjusts the amounts
as necessary.
|
|
For the Year
Ended
June
30,
|
|
|
|
2021
|
2020
|
|
Beginning
|
$12
|
$39
|
|
Additions charged
to cost and expenses
|
7
|
1
|
|
Utilization
|
(4)
|
(27)
|
|
Currency
translation effect
|
(1)
|
(1)
|
|
Ending
|
$14
|
$12
|
F-21
14. BANK LOANS PAYABLE
Bank
loans payable consisted of the following:
|
|
June
30, 2021
|
June
30, 2020
|
|
Note payable
denominated in RM for expansion plans in Malaysia, maturing in
August 2024, bearing interest at the bank’s prime rate less
2.00% (3.60% and 3.85% at June 30, 2021 and June 30, 2020) per
annum, respectively, with monthly payments of principal plus
interest through August 2028, collateralized by the acquired
building with a carrying value of $2,579 and $2,543, as at June 30,
2021 and June 30, 2020, respectively.
|
$1,885
|
$2,206
|
|
|
|
|
|
Financial
arrangement at fixed interest rate 3.2% per annum with monthly
payments of principal plus interest through July 2025
|
$175
|
-
|
|
|
|
|
|
Total
bank loans payable
|
2,060
|
2,206
|
|
|
|
|
|
Current portion of
bank loans payable
|
428
|
384
|
|
Currency
translation effect on current portion of bank loans
|
11
|
(14)
|
|
Current
portion of bank loans payable
|
439
|
370
|
|
Long term portion
of bank loans payable
|
1,564
|
1,911
|
|
Currency
translation effect on long-term portion of bank loans
|
57
|
(75)
|
|
Long
term portion of bank loans payable
|
$1,621
|
$1,836
|
Future
minimum payments (excluding interest) as of June 30, 2021, were as
follows:
|
2022
|
$439
|
|
2023
|
457
|
|
2024
|
462
|
|
2025
|
208
|
|
2026
|
171
|
|
Thereafter
|
323
|
|
Total
obligations and commitments
|
$2,060
|
Future
minimum payments (excluding interest) as of June 30, 2020, were as
follows:
|
2021
|
$370
|
|
2022
|
384
|
|
2023
|
400
|
|
2024
|
403
|
|
2025
|
158
|
|
Thereafter
|
491
|
|
Total
obligations and commitments
|
$2,206
|
F-22
15. COMMITMENTS AND CONTINGENCIES
The
Company had capital commitments in Malaysia for the purchase of
equipment and other related infrastructure costs amounting to
RM388, or approximately $93 as at June 30, 2021.
Deposits
with banks in China are not insured by the local government or
agency and are consequently exposed to risk of loss. The Company
believes the probability of a bank failure, causing loss to the
Company, is remote.
The
Company is, from time to time, the subject of litigation claims and
assessments arising out of matters occurring in its normal business
operations. In the opinion of management, resolution of these
matters will not have a material adverse effect on the
Company’s consolidated financial statements.
16. FAIR VALUE OF FINANCIAL INSTRUMENTS APPROXIMATE CARRYING
VALUE
In
accordance with ASC Topic 825 and 820, the following presents
assets and liabilities measured and carried at fair value and
classified by level of fair value measurement
hierarchy:
There
were no transfers between Levels 1 and 2 during the fiscal year
ended June 30, 2021, or for the same period in the prior fiscal
year.
Term
deposits (Level 2) – The carrying amount approximates fair
value because of the short maturity of these
instruments.
Restricted
term deposits (Level 2) – The carrying amount approximates
fair value because of the short maturity of these
instruments.
PPP
loan (Level 2) – The carrying amount approximates its fair
value based on similar short-term debt issues available to the
Company.
Lines
of credit (Level 3) – The carrying value of the lines of
credit approximates fair value due to the short-term nature of the
obligations.
Bank
loans payable (Level 3) – The carrying value of the
Company’s bank loan payables approximates its fair value as
the interest rates associated with long-term debt is adjustable in
accordance with market situations when the Company borrowed funds
with similar terms and remaining maturities.
17. CONCENTRATION OF CUSTOMERS
The
Company had two major customer that accounted for the following
revenue and trade account receivables:
|
|
For
the Year Ended
June
30,
|
|
|
|
2021
|
2020
|
|
Revenue
|
|
|
|
Customer
A
|
37.7%
|
38.4%
|
|
Customer
B
|
9.7%
|
17.6%
|
|
|
|
|
|
Trade Account
Receivables
|
|
|
|
Customer
A
|
34.7%
|
40.6%
|
|
Customer
B
|
11.8%
|
6.3%
|
F-23
18. BUSINESS SEGMENTS
In
fiscal year 2021, the Company operated in four segments; the
testing service industry (which performs structural and electronic
tests of semiconductor devices), the designing and manufacturing of
equipment (assembly of equipment that tests the structural
integrity of integrated circuits and other products), distribution
of various products from other manufacturers in Singapore and Asia
and the real estate segment in China.
The
revenue allocated to individual countries was based on where the
customers were located. The allocation of the cost of equipment,
the current year investment in new equipment and depreciation
expense have been made on the basis of the primary purpose for
which the equipment was acquired.
All
intersegment sales were sales from the manufacturing segment to the
testing and distribution segment. Total intersegment sales were
$410 in fiscal year 2021 and $816 in fiscal year 2020. Corporate
assets mainly consisted of cash and prepaid expenses. Corporate
expenses mainly consisted of stock option expenses, salaries,
insurance, professional expenses and directors' fees. Corporate
expenses are allocated to the four segments on a predetermined
fixed amount calculated based on the annual budgeted sales, except
the Malaysia operation, which is calculated based on actual sales.
The following segment information table includes segment operating
income or loss after including corporate expenses allocated to the
segments, which gets eliminated in the consolidation.
|
Business
Segment Information:
|
||||||
|
|
Year
|
|
Operating
|
|
Depr.
|
|
|
|
Ended
|
Net
|
Income
|
Total
|
and
|
Capital
|
|
|
June
30,
|
Revenue
|
(Loss)
|
Assets
|
Amort.
|
Expenditures
|
|
Manufacturing
|
2021
|
$13,151
|
$376
|
$13,622
|
$411
|
$350
|
|
|
2020
|
$11,605
|
$(326)
|
$9,807
|
$346
|
$134
|
|
|
|
|
|
|
|
|
|
Testing
Services
|
2021
|
13,846
|
(997)
|
21,099
|
2,570
|
762
|
|
|
2020
|
14,840
|
(1,040)
|
21,086
|
2,578
|
834
|
|
|
|
|
|
|
|
|
|
Distribution
|
2021
|
5,437
|
657
|
1,156
|
4
|
-
|
|
|
2020
|
7,958
|
751
|
875
|
100
|
-
|
|
|
|
|
|
|
|
|
|
Real
Estate
|
2021
|
28
|
(116)
|
2,070
|
74
|
|
|
|
2020
|
62
|
(97)
|
3,587
|
76
|
|
|
|
|
|
|
|
|
|
|
Fabrication
|
2021
|
-
|
-
|
-
|
-
|
-
|
|
Services*
|
2020
|
-
|
-
|
27
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Corporate
&
|
2021
|
-
|
(10)
|
359
|
-
|
|
|
Unallocated
|
2020
(Restated)
|
-
|
(235)
|
278
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
Company
|
2021
|
$32,462
|
$(70)
|
$38,306
|
$3,059
|
$1,112
|
|
|
2020
|
$34,465
|
$(947)
|
$35,660
|
$3,100
|
$1,017
|
*
Fabrication services is a discontinued operation.
F-24
19. OTHER INCOME, NET
Other
income, net consisted of the following:
|
|
For
the Year Ended
June
30,
|
|
|
|
2021
|
2020
|
|
Interest
income
|
118
|
177
|
|
Other rental
income
|
100
|
110
|
|
Exchange
loss
|
(69)
|
(35)
|
|
Bad debt recovery/
(expense)
|
9
|
(59)
|
|
Extinguishment of
PPP loan
|
121
|
-
|
|
Dividend
income
|
32
|
-
|
|
Other miscellaneous
income
|
52
|
141
|
|
Total
|
$363
|
$334
|
20. GOVERNMENT GRANTS
|
|
For
the Year Ended
June
30,
|
|
|
|
2021
|
2020
|
|
Government
grants
|
514
|
778
|
During
fiscal year 2021, the Company received government grants amounting
to $514, of which $401 were the financial assistance received from
the Singapore and Malaysia governments amid the COVID-19
pandemic.
During
fiscal year 2020, the Company received government grants amounting
to $778, of which $718 were the financial assistance received from
the Singapore, Malaysia and China governments amid the COVID-19
pandemic.
21. INCOME TAXES
(Loss)/Income
before provision for income taxes consists of the
following:
|
|
For
the Year Ended
June
30,
|
|
|
|
2021
|
2020
|
|
United
States
|
(53)
|
(740)
|
|
International
|
(846)
|
1,847
|
|
Total
|
$(899)
|
$1,107
|
The
components of the provision for income taxes are as
follows:
|
|
For
the Year Ended
June
30,
|
|
|
|
2021
|
2020
|
|
Current:
|
|
|
|
Federal
|
$13
|
$(1)
|
|
State
|
2
|
2
|
|
Foreign
|
352
|
212
|
|
|
$367
|
$213
|
|
Deferred:
|
|
|
|
Federal
|
$-
|
$-
|
|
State
|
-
|
-
|
|
Foreign
|
(139)
|
(225)
|
|
|
(139)
|
(225)
|
|
Total
provisions
|
$228
|
$(12)
|
F-25
A
reconciliation of income tax benefit compared to the amount of
income tax expense that would result by applying the U.S. federal
statutory income tax rate to pre-tax income is as
follows:
|
|
For
the Year Ended
June
30,
|
|
|
|
2021
|
2020
|
|
Statutory federal
tax rate
|
21.00%
|
21.00%
|
|
State taxes, net of
federal benefit
|
(0.41)
|
(0.50)
|
|
Permanent items and
credits
|
4.1
|
13.95
|
|
Foreign rate
differential
|
74.02
|
(33.86)
|
|
Other
|
0.67
|
2.14
|
|
Changes in
valuation allowance
|
(74.02)
|
(3.73)
|
|
Tax reform related
to one-time repatriation tax
|
-
|
-
|
|
Effective
rate
|
25.36%
|
(1.00)%
|
The
provision for income taxes has been determined based upon the tax
laws and rates in the countries in which we operate. The Company is
subject to income taxes in the U.S. and numerous foreign
jurisdictions. Significant judgment is required in determining the
provision for income taxes and income tax assets and liabilities,
including evaluating uncertainties in the application of accounting
principles and complex tax laws.
Due to
the enactment of Tax Cuts and Jobs Act, the Company is subject to a
tax on global intangible low-taxed income
(“GILTI”). GILTI is a tax on foreign income
in excess of a deemed return on tangible assets of foreign
corporations. Companies subject to GILTI have the option to account
for the GILTI tax as a period cost if and when incurred, or to
recognize deferred taxes for temporary differences including
outside basis differences expected to reverse as GILTI. The Company
has elected to account for GILTI as a period cost, and therefore
has included GILTI expense in its effective tax rate calculation
for the year ended June 30, 2021.
On
March 27, 2020, The Coronavirus Aid, Relief, and Economic Security
Act (CARES Act) was enacted by the US Government in response to the
COVID-19 pandemic. The CARES Act, among other things, includes
provisions relating to refundable payroll tax credits, deferment of
employer side social security payments, net operating loss
carryback periods, alternative minimum tax credit refunds,
modifications to the net interest deduction limitations and
technical corrections to tax depreciation methods for qualified
improvement property. The CARES Act did not have a material impact
to the consolidated financial statements as of June 30,
2021. During fiscal year
ended June 30, 2021, the Company received acknowledgement of
forgiveness of its paycheck protection program loan which is
treated as tax-exempt income for US federal tax
purposes.
The
Company has maintained an indefinite reinvestment assertion as of
June 30, 2021. Accordingly, no deferred taxes related to
withholding taxes or unrealized foreign currency gains or losses
have been recorded.
In
assessing the ability to realize the deferred tax assets,
management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which
those temporary differences become deductible. Management considers
the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this
assessment. Based on these criteria, management believes it is more
likely than not the Company will not realize the benefits of the
federal, state, and foreign deductible differences. Accordingly, a
full valuation allowance has been established.
F-26
Temporary
differences that give rise to a significant portion of deferred tax
assets and deferred tax liabilities are as follows for the year
ended June 30:
|
|
For the Year Ended
June 30,
|
|
|
Deferred tax
assets:
|
2021
|
2020
|
|
Net operating
losses and credits
|
$782
|
$487
|
|
Inventory
valuation
|
144
|
121
|
|
Provision for bad
debts
|
-
|
785
|
|
Accrued
vacation
|
12
|
37
|
|
Accrued
expenses
|
134
|
188
|
|
Fixed asset
basis
|
3
|
1
|
|
Investment in
subsidiaries
|
77
|
277
|
|
Unrealized
gain
|
4
|
24
|
|
Other
|
12
|
51
|
|
Total deferred tax
assets
|
$1,168
|
$1,971
|
|
Deferred tax
liabilities:
|
|
|
|
Depreciation
|
(329)
|
(359)
|
|
Others
|
(-)
|
(76)
|
|
Total deferred
income tax liabilities
|
$(329)
|
$(435)
|
|
|
|
|
|
Subtotal
|
839
|
1,536
|
|
Valuation
allowance
|
(622)
|
(1,289)
|
|
Net
deferred tax assets
|
$217
|
$247
|
|
|
|
|
|
Presented
as follows in the balance sheets:
|
|
|
|
Deferred tax
assets
|
217
|
247
|
|
Deferred tax
liabilities
|
-
|
-
|
|
Net
deferred tax assets
|
$217
|
$247
|
The valuation allowance decreased by $667 and increased by $527 in
fiscal years 2021 and 2020, respectively.
At June 30, 2021, the Company had federal net operating loss
carryforwards and state net operating loss carryforward of $1,248,
which expire through 2033. These carryovers may be subject to
limitations under I.R.C. Section 382. Management of the Company is
uncertain whether it is more likely than not that these future
benefits will be realized. Accordingly, a full valuation allowance
was established.
Generally,
U.S. federal, state, and foreign authorities may examine the
Company’s tax returns for three years, four years, and five
years, respectively, from the date an income tax return is filed.
However, the taxing authorities may continue to adjust the
Company’s net operating loss carryforwards until the statute
of limitations closes on the tax years in which the net operating
losses are utilized.
F-27
22. REVENUE
The
Company generates revenue primarily from 3 different segments:
Manufacturing, Testing and Distribution. The Company accounts for a
contract with a customer when there is approval and commitment from
both parties, the rights of the parties are identified, payment
terms are identified, the contract has commercial substance and
collectability of consideration is probable. The Company’s
revenues are measured based on consideration stipulated in the
arrangement with each customer, net of any sales incentives and
amounts collected on behalf of third parties, such as sales taxes.
The revenues are recognized as separate performance obligations
that are satisfied by transferring control of the product or
service to the customer.
Significant Judgments
The
Company’s arrangements with its customers include various
combinations of products and services, which are generally capable
of being distinct and accounted for as separate performance
obligations. A product or service is considered distinct if it is
separately identifiable from other deliverables in the arrangement
and if a customer can benefit from it on its own or with other
resources that are readily available to the customer.
The
Company allocates the transaction price to each performance
obligation on a relative stand-alone selling price basis
(“SSP”). Determining the SSP for each distinct
performance obligation and allocation of consideration from an
arrangement to the individual performance obligations and the
appropriate timing of revenue recognition are significant judgments
with respect to these arrangements. The Company typically
establishes the SSP based on observable prices of products or
services sold separately in comparable circumstances to similar
clients. The Company may estimate SSP by considering internal
costs, profit objectives and pricing practices in certain
circumstances.
Warranties,
discounts and allowances are estimated using historical and recent
data trends. The Company includes estimates in the transaction
price only to the extent that a significant reversal of revenue is
not probable in subsequent periods. The Company’s products
and services are generally not sold with a right of return, nor has
the Company experienced significant returns from or refunds to its
customers.
Manufacturing
The
Company primarily derives revenue from the sale of both front-end
and back-end semiconductor test equipment and related peripherals,
maintenance and support of all these products, installation and
training services and the sale of spare parts. The Company’s
revenues are measured based on consideration stipulated in the
arrangement with each customer, net of any sales incentives and
amounts collected on behalf of third parties, such as sales
taxes.
F-28
The
Company recognizes revenue at a point in time when the Company has
satisfied its performance obligation by transferring control of the
product to the customer. The Company uses judgment to evaluate
whether the control has transferred by considering several
indicators, including:
●
whether the Company
has a present right to payment;
●
the customer has
legal title;
●
the customer has
physical possession;
●
the customer has
significant risk and rewards of ownership; and
●
the customer has
accepted the product, or whether customer acceptance is considered
a formality based on history of acceptance of similar products (for
example, when the customer has previously accepted the same
equipment, with the same specifications, and when we can
objectively demonstrate that the tool meets all of the required
acceptance criteria, and when the installation of the system is
deemed perfunctory).
Not all
of the indicators need to be met for the Company to conclude that
control has transferred to the customer. In circumstances in which
revenue is recognized prior to the product acceptance, the portion
of revenue associated with its performance obligations of product
installation and training services are deferred and recognized upon
acceptance.
The
majority of sales under the Manufacturing segment include a
standard 12-month warranty. The Company has concluded that the
warranty provided for standard products are assurance type
warranties and are not separate performance obligations. Warranty
provided for customized products are service warranties and are
separate performance obligations. Transaction prices are allocated
to this performance obligation using cost plus method. The portion
of revenue associated with warranty service is deferred and
recognized as revenue over the warranty period, as the customer
simultaneously receives and consumes the benefits of warranty
services provided by the Company.
Testing
The
Company renders testing services to manufacturers and purchasers of
semiconductors and other entities who either lack testing
capabilities or whose in-house screening facilities are
insufficient. The Company primarily derives testing revenue from
burn-in services, manpower supply and other associated services.
SSP is directly observable from the sales orders. Revenue is
allocated to performance obligations satisfied at a point in time
depending upon terms of the sales order. Generally, there is no
other performance obligation other than what has been stated inside
the sales order for each of these sales.
Terms
of contract that may indicate potential variable consideration
included warranty, late delivery penalty and reimbursement to solve
nonconformance issues for rejected products. Based on historical
and recent data trends, it is concluded that these terms of the
contract do not represent potential variable consideration. The
transaction price is not contingent on the occurrence of any future
event.
Distribution
The
Company distributes complementary products, particularly equipment,
industrial products and components by manufacturers mainly from the
U.S., Europe, Taiwan and Japan. The Company recognizes revenue from
product sales at a point in time when the Company has satisfied its
performance obligation by transferring control of the product to
the customer. The Company uses judgment to evaluate whether the
control has transferred by considering several indicators discussed
above. The Company recognizes the revenue at a point in time,
generally upon shipment or delivery of the products to the customer
or distributors, depending upon terms of the sales
order.
Method and Impact of Adoption
Effective
as of July 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic
606), and its related amendments using the modified
retrospective transition method. This method was applied to
contracts that were not complete as of the date of adoption. Under
the modified retrospective transition approach, periods prior to
the adoption date were not adjusted and continue to be reported in
accordance with ASC Topic 605.
An
assessment was made on the impact of all existing arrangements as
at the date of adoption, under ASC Topic 606, to identify the
cumulative effect of applying ASC Topic 606 on the beginning
retained earnings. The Company quantified the impact of the
adoption on its financial position, results of operations
and cash flow, and the impact was insignificant to the
Company.
F-29
The
impact is primarily driven by the changes related to the accounting
of standard warranty. Prior to adoption of ASC Topic 606, the
Company accounted for the estimated warranty cost as a charge to
costs of sales when revenue was recognized. Upon adoption of ASC
Topic 606, the standard warranty for customized products is
recognized as a separate performance obligation.
The
Company has completed its adoption and implemented policies,
processes and controls to support the standard’s measurement
and disclosure requirements. The Company recognizes net product
revenue when it satisfies the obligations as evidenced by the
transfer of control of its products and services to customers. The
guidance did not have material impact on the Company’s
consolidated financial results.
Contract Balances
The
timing of revenue recognition, billings and collections may result
in billed account receivables, unbilled receivables (contract
assets), and customer advances and deposits (contract liabilities).
The Company’s payment terms and conditions vary by contract
type, although terms generally include a requirement of payment of
70% to 90% of total contract consideration within 30 to 60 days of
shipment, with the remainder payable within 30 days of acceptance.
In instances where the timing of revenue recognition differs from
the timing of invoicing, the Company has determined that its
contracts generally do not include a significant financing
component.
Contract
assets were recorded under other receivable while contract
liabilities were recorded under accrued expenses in the balance
sheet.
The
following table is the reconciliation of contract
balances.
|
|
June
30,
|
June
30,
|
|
|
2021
|
2020
|
|
Trade Account
Receivables
|
8,293
|
5,951
|
|
Accounts
Payable
|
3,702
|
2,590
|
|
Contract
Assets
|
337
|
216
|
|
Contract
Liabilities
|
628
|
476
|
Remaining Performance Obligation
As at June 30, 2021, the Company had $924 of remaining performance
obligations, which represents our obligation to deliver products
and services. Given the profile of contract terms,
approximately 82.2% of this amount is expected to be recognized as
revenue over the next two years, while the remaining amount is
expected to be recognized between three and five
years.
Refer
to note 18 “Business Segments” of the Notes to
Consolidated Financial Statements for information related to
revenue.
Practical Expedients
The
Company applies the following practical expedients:
●
The
Company accounts for shipping and handling costs as activities to
fulfill the promise to transfer the goods, instead of a promised
service to its customer.
●
The
Company has not elected to adjust the promised amount of
consideration for the effects of a significant financing component
as the Company expects, at contract inception, that the period
between when the entity transfers a promised good or service to a
customer and when the customer pays for that good or service will
generally be one year or less.
●
The
Company has elected to adopt the practical expedient for contract
costs, specifically in relation to incremental costs of obtaining a
contract.
Costs
to obtain a contract are not material, and the Company generally
expenses such costs as incurred because the amortization period is
one year or less.
F-30
23. EARNINGS PER SHARE
The
Company adopted ASC Topic 260, Earnings Per Share. Basic earnings per
share (“EPS”) are computed by dividing net income
available to common shareholders (numerator) by the weighted
average number of common shares outstanding (denominator) during
the period. Diluted EPS give effect to all dilutive potential
common shares outstanding during a period. In computing diluted
EPS, the average price for the period is used in determining the
number of shares assumed to be purchased from the exercise of stock
options and warrants.
Options
to purchase 674,500 shares of Common Stock at exercise prices
ranging from $2.53 to $5.98 per share were outstanding as of June
30, 2021. 348,000 stock options were excluded in the computation of
diluted EPS for fiscal year 2021 because they were
anti-dilutive.
Options
to purchase 763,500 shares of Common Stock at exercise prices
ranging from $2.53 to $5.98 per share were outstanding as of June
30, 2020. 410,000 (restated) stock options were excluded in the
computation of diluted EPS for fiscal year 2020 because they were
anti-dilutive.
The
following table is a reconciliation of the weighted average shares
used in the computation of basic and diluted EPS for the years
presented herein:
|
|
For
the Year Ended
June
30,
|
|
|
|
2021
|
2020
(Restated)
|
|
|
|
|
|
(Loss) / Income
attributable to Trio-Tech International common shareholders from
continuing operations, net of tax
|
$(575)
|
$879
|
|
Loss attributable
to Trio-Tech International common shareholders from discontinued
operations, net of tax
|
$(16)
|
$(1)
|
|
|
|
|
|
Net
(Loss) / income attributable to Trio-Tech International common
shareholders
|
(591)
|
878
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
3,768
|
3,673
|
|
Dilutive effect of
stock options
|
117
|
53
|
|
Number
of shares used to compute earnings per share - diluted
|
3,885
|
3,726
|
|
|
|
|
|
Basic
(Loss) / Earnings per Share:
|
|
|
|
Basic (loss) /
earnings per share from continuing operations attributable to
Trio-Tech International
|
$(0.16)
|
$0.24
|
|
Basic loss per
share from discontinued operations attributable to Trio-Tech
International
|
$-
|
$-
|
|
|
|
|
|
Basic
(Loss) / Earnings per Share from net income attributable to
Trio-Tech International
|
$(0.16)
|
$0.24
|
|
|
|
|
|
Diluted
(Loss) / Earnings per Share:
|
|
|
|
Diluted (loss) /
earnings per share from continuing operations attributable to
Trio-Tech International
|
$(0.15)
|
$0.24
|
|
Diluted loss per
share from discontinued operations attributable to Trio-Tech
International
|
-
|
-
|
|
|
|
|
|
Diluted
(Loss) / Earnings per Share from net income attributable to
Trio-Tech International
|
$(0.15)
|
$0.24
|
F-31
24. STOCK OPTIONS (RESTATED)
On
September 24, 2007, the Company’s Board of Directors
unanimously adopted the 2007 Employee Stock Option Plan (the
“2007 Employee Plan”) and the 2007 Directors Equity
Incentive Plan (the “2007 Directors Plan”), each of
which was approved by the shareholders on December 3, 2007. Each of
those plans was amended during the term of such plan to increase
the number of shares covered thereby. As of the last amendment
thereof, the 2007 Employee Plan covered an aggregate of 600,000
shares of the Company’s Common Stock and the 2007 Directors
Plan covered an aggregate of 500,000 shares of the Company’s
Common Stock. Each of those plans terminated by its respective
terms on September 24, 2017. These two plans were administered by
the Board, which also established the terms of the
awards.
On
September 14, 2017, the Company’s Board of Directors
unanimously adopted the 2017 Employee Stock Option Plan (the
“2017 Employee Plan”) and the 2017 Directors Equity
Incentive Plan (the “2017 Directors Plan”) each of
which was approved by the shareholders on December 4, 2017.
The Company’s board of directors
approved an amendment to the 2017 Directors Plan in September 2020
to increase the shares covered thereby from 300,000 shares to an
aggregate of 600,000 shares, which amendment was approved by the
Company’s shareholders at the annual meeting held in December
2020. Each of these plans is administered by the Board of
Directors of the Company.
Assumptions
The
fair value for the options granted were estimated using the
Black-Scholes option pricing model with the following weighted
average assumptions, assuming no expected dividends:
|
|
For the Year
Ended
June 30,
|
|
|
|
2021
|
2020
|
|
Expected
volatility
|
40.89% to
69.03%
|
40.89% to
55.19%
|
|
Risk-free interest
rate
|
0.14% to 2.35%
|
0.30% to 2.35%
|
|
Expected life
(years)
|
2.5 - 3.25
|
2.5 - 3.25
|
The
expected volatilities are based on the historical volatility of the
Company’s stock. Due to higher volatility, the observation is
made on a daily basis for the twelve months ended June 30, 2021 and
2020 respectively. The observation period covered is consistent
with the expected life of the options. The expected life of the
options granted to employees has been determined utilizing the
“simplified” method as prescribed by ASC Topic 718
Stock Based
Compensation, which, among other provisions, allows
companies without access to adequate historical data about employee
exercise behavior to use a simplified approach for estimating the
expected life of a "plain vanilla" option grant. The
simplified rule for estimating the expected life of such an option
is the average of the time to vesting and the full term of the
option. The risk-free rate is consistent with the expected life of
the stock options and is based on the United States Treasury yield
curve in effect at the time of grant.
2017 Employee Stock Option Plan
The
Company’s 2017 Employee Plan permits the grant of stock
options to its employees covering up to an aggregate of 300,000
shares of Common Stock. Under the 2017 Employee Plan, all options
must be granted with an exercise price of no less than fair value
as of the grant date and the options granted must be exercisable
within a maximum of ten years after the date of grant, or such
lesser period of time as is set forth in the stock option
agreements. The options may be exercisable (a) immediately as of
the effective date of the stock option agreement granting the
option, or (b) in accordance with a schedule related to the date of
the grant of the option, the date of first employment, or such
other date as may be set by the Compensation Committee. Generally,
options granted under the 2017 Employee Plan are exercisable within
five years after the date of grant, and vest over the period as
follows: 25% vesting on the grant date and the remaining balance
vesting in equal installments on the next three succeeding
anniversaries of the grant date. The share-based compensation will
be recognized in terms of the grade method on a straight-line basis
for each separately vesting portion of the award. Certain option
awards provide for accelerated vesting if there is a change in
control (as defined in the 2017 Employee Plan).
The
Company granted options to purchase 71,000 shares of its Common
Stock to employees pursuant to the 2017 Employee Plan during the
twelve months ended June 30, 2021. The
weighted average grant-date fair value of stock options granted
during the year ended June 30, 2021 was $1.88. The total
fair value of vested employee stock options granted during the year
ended June 30, 2021 was $39.
There
were no stock options exercised during the twelve months ended June
30, 2021. The Company recognized stock-based compensation expenses
of $10 and $105 in the three and twelve months ended June 30, 2021,
respectively under the 2017 Employee Plan. The balance of
unamortized stock-based compensation of $71 based on fair value on
the grant date related to options granted under the 2017 Employee
Plan is to be recognized over a period of three years. The weighted
average remaining contractual term for non-vested options was 2.00
years.
F-32
As of
June 30, 2021, there were vested employee stock options granted
under the 2017 Employee Plan covering a total of 164,750 shares of
Common Stock. The weighted average exercise price was $4.35, and
the weighted average contractual term was 2.74 years. The total
fair value of vested employee stock options as of June 30, 2021 was
$268.
The
Company granted options to purchase 60,000 shares of its Common
Stock to employees pursuant to the 2017 Employee Plan during the
twelve months ended June 30, 2020. The
weighted average grant-date fair value of stock options granted
during the year ended June 30, 2020 was $0.85. The total
fair value of vested employee stock options granted during the year
ended June 30, 2020 was $16.
There
were no stock options exercised during the twelve months ended June
30, 2020. The Company recognized stock-based compensation expenses
of $18* and $85* in the three and twelve months ended June 30,
2020, respectively under the 2017 Employee Plan. The balance of
unamortized stock-based compensation of $54* based on fair value on
the grant date related to options granted under the 2017 Employee
Plan is to be recognized over a period of three years. The weighted
average remaining contractual term for non-vested options was 2.03
years.
As of
June 30, 2020, there were vested employee stock options granted
under the 2017 Employee Plan covering a total of 98,000 shares of
Common Stock. The weighted average exercise price was $4.44 and the
weighted average contractual term was 3.41 years. The total fair
value of vested employee stock options as of June 30, 2020 was
$164*.
A
summary of option activities under the 2017 Employee Plan during
the twelve-month period ended June 30, 2021 is presented as
follows:
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted Average
Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
Outstanding at July
1, 2020
|
196,000
|
$3.92
|
3.72
|
$36
|
|
Granted
|
71,000
|
5.03
|
4.16
|
14
|
|
Exercised
|
-
|
-
|
-
|
-
|
|
Forfeited or
expired
|
-
|
-
|
-
|
-
|
|
Outstanding at June
30, 2021
|
267,000
|
4.21
|
3.22
|
290
|
|
Exercisable at June
30, 2021
|
164,750
|
4.35
|
2.74
|
173
|
|
|
Options
|
Weighted Average
Grant-Date
Fair
Value
|
|
|
|
|
|
Non-vested at July
1, 2020
|
98,000
|
$1.79
|
|
Granted
|
71,000
|
1.88
|
|
Vested
|
(66,750)
|
1.83
|
|
Forfeited
|
-
|
-
|
|
Non-vested at June
30, 2021
|
102,250
|
$2.29
|
|
|
|
|
F-33
A
summary of option activities under the 2017 Employee Plan during
the twelve-month period ended June 30, 2020 is presented as
follows:
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted Average
Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
Outstanding at July
1, 2019
|
136,000
|
$4.53
|
4.28
|
$-
|
|
Granted
|
60,000
|
2.53
|
2.73
|
36
|
|
Exercised
|
-
|
-
|
-
|
-
|
|
Forfeited or
expired
|
-
|
-
|
-
|
-
|
|
Outstanding at June
30, 2020
|
196,000
|
3.92
|
3.72
|
36
|
|
Exercisable at June
30, 2020
|
98,000
|
4.44
|
3.41
|
9
|
|
|
Options
|
Weighted Average
Grant-Date
Fair
Value
|
|
|
|
|
|
Non-vested at July
1, 2019
|
87,000
|
$1.43
|
|
Granted
|
60,000
|
0.85
|
|
Vested
|
(49,000)
|
1.51
|
|
Forfeited
|
-
|
-
|
|
Non-vested at June
30, 2020
|
98,000
|
$1.79
|
|
|
|
|
2007 Employee Stock Option Plan
The
2007 Employee Plan terminated by its terms on September 24, 2017
and no further options may be granted thereunder. However, the
options outstanding thereunder continue to remain outstanding and
in effect in accordance with their terms. The 2007 Employee Plan
permitted the issuance of options to employees.
There
were 40,000 options exercised during the twelve months ended June
30, 2021. The Company recognized stock-based compensation expenses
of $Nil in the twelve months ended June 30, 2021 under the 2007
Employee Plan.
There
were no options exercised during the twelve months ended June 30,
2020. The Company recognized stock-based compensation expenses of
$Nil in the twelve months ended June 30, 2020 under the 2007
Employee Plan.
As of
June 30, 2021, there were vested employee stock options that were
exercisable covering a total of 37,500 shares of Common Stock. The
weighted average exercise price was $4.14 and the weighted average
contractual term was 0.75 years. The total fair value of vested
employee stock options as of June 30, 2021 was $61.
As of
June 30, 2020, there were vested employee stock options that were
exercisable covering a total of 77,500 shares of Common Stock. The
weighted average exercise price was $3.69 and the weighted average
contractual term was 1.22 years. The total fair value of vested
employee stock options as of June 30, 2020 was $120.
F-34
A
summary of option activities under the 2007 Employee Plan during
the twelve-month period ended June 30, 2021, is presented as
follows:
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted Average
Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
Outstanding at July
1, 2020
|
77,500
|
$3.69
|
1.22
|
$-
|
|
Granted
|
-
|
-
|
-
|
-
|
|
Exercised
|
(40,000)
|
3.26
|
-
|
-
|
|
Forfeited or
expired
|
-
|
-
|
-
|
-
|
|
Outstanding at June
30, 2021
|
37,500
|
$4.14
|
0.75
|
$-
|
|
Exercisable at June
30, 2021
|
37,500
|
$4.14
|
0.75
|
$-
|
A
summary of option activities under the 2007 Employee Plan during
the twelve-month period ended June 30, 2020, is presented as
follows:
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted Average
Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
|
|
||||
|
Outstanding at July
1, 2019
|
77,500
|
$3.69
|
2.22
|
$-
|
|
Granted
|
-
|
-
|
-
|
-
|
|
Exercised
|
-
|
-
|
-
|
-
|
|
Forfeited or
expired
|
-
|
-
|
-
|
-
|
|
Outstanding at June
30, 2020
|
77,500
|
$3.69
|
1.22
|
$-
|
|
Exercisable at June
30, 2020
|
77,500
|
$3.69
|
1.22
|
$-
|
A
summary of the status of the Company’s non-vested employee
stock options during the twelve months ended June 30, 2021, is
presented below:
|
|
|
Weighted Average
Grant-Date
|
|
|
Options
|
Fair
Value
|
|
|
|
|
|
Non-vested at July
1, 2020
|
-
|
$-
|
|
Granted
|
-
|
-
|
|
Vested
|
-
|
-
|
|
Forfeited
|
-
|
-
|
|
Non-vested at June
30, 2021
|
-
|
$-
|
A
summary of the status of the Company’s non-vested employee
stock options during the twelve months ended June 30, 2020, is
presented below:
|
|
|
Weighted Average
Grant-Date
|
|
|
Options
|
Fair
Value
|
|
|
|
|
|
Non-vested at July
1, 2019
|
9,375
|
$1.22
|
|
Granted
|
-
|
-
|
|
Vested
|
(9,375)
|
1.22
|
|
Forfeited
|
-
|
-
|
|
Non-vested at June
30, 2020
|
-
|
$-
|
F-35
2017 Directors Equity Incentive Plan
The
2017 Directors Plan initially covered an aggregate of 300,000
shares of the Company’s common stock. The Company’s
board of directors approved an amendment to the 2017 Directors Plan
in September 2020 to increase the shares covered thereby from
300,000 shares to an aggregate of 600,000 shares, which amendment
was approved by the Company’s shareholders at the annual
meeting held in December 2020. The 2017 Directors Plan permits the
grant of options to its directors in the form of non-qualified
options and restricted stock. The exercise price of the
non-qualified options is required to be 100% of the fair value of
the underlying shares on the grant date. The options have five-year
contractual terms and are exercisable immediately as of the grant
date.
In the
fiscal year ended June 30, 2021, the Company granted options to
purchase 80,000 shares of its Common Stock to directors pursuant to
the 2017 Directors Plan with an exercise price equal to the fair
market value of Common Stock (as defined under the 2017 Directors
Plan in conformity with Regulation 409A or the Internal Revenue
Code of 1986, as amended) at the date of grant. The fair value of
the options granted to purchase 80,000 shares of the
Company’s Common Stock was approximately $143 based on the
fair value of $1.79 per share determined by the Black-Scholes
option pricing model. As all of the stock options granted under the
2017 Directors Plan vest immediately at the date of grant, there
were no unvested stock options granted under the 2017 Directors
Plan as of June 30, 2021. There were no options exercised during
the twelve months ended June 30, 2021. The Company recognized
stock-based compensation expenses of $143 in the twelve months
ended June 30, 2021 under the 2017 Directors Plan.
In the
fiscal year ended June 30, 2020, the Company granted options to
purchase 80,000 shares of its Common Stock to directors pursuant to
the 2017 Directors Plan with an exercise price equal to the fair
market value of Common Stock (as defined under the 2017 Directors
Plan in conformity with Regulation 409A or the Internal Revenue
Code of 1986, as amended) at the date of grant. The fair value of
the options granted to purchase 80,000 shares of the
Company’s Common Stock was approximately $61* based on the
fair value of $0.76* per share determined by the Black-Scholes
option pricing model. As all of the stock options granted under the
2017 Directors Plan vest immediately at the date of grant, there
were no unvested stock options granted under the 2017 Directors
Plan as of June 30, 2020. There were no options exercised during
the twelve months ended June 30, 2020. The Company recognized
stock-based compensation expenses of $61 in the twelve months ended
June 30, 2020, under the 2017 Directors Plan.
A
summary of option activities under the 2017 Directors Plan during
the twelve months ended June 30, 2021, is presented as
follows:
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted Average
Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
Outstanding at July
1, 2020
|
240,000
|
$3.93
|
3.75
|
$48
|
|
Granted
|
80,000
|
5.27
|
4.64
|
-
|
|
Exercised
|
-
|
-
|
-
|
-
|
|
Forfeited or
expired
|
-
|
-
|
-
|
-
|
|
Outstanding at June
30, 2021
|
320,000
|
4.27
|
3.22
|
340
|
|
Exercisable at June
30, 2021
|
320,000
|
4.27
|
3.22
|
340
|
A
summary of option activities under the 2017 Directors Plan during
the twelve months ended June 30, 2020, is presented as
follows:
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted Average
Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
Outstanding at July
1, 2019
|
160,000
|
$4.63
|
4.25
|
$-
|
|
Granted
|
80,000
|
2.53
|
4.73
|
48
|
|
Exercised
|
-
|
-
|
-
|
-
|
|
Forfeited or
expired
|
-
|
-
|
-
|
-
|
|
Outstanding at June
30, 2020
|
240,000
|
3.93
|
3.75
|
48
|
|
Exercisable at June
30, 2020
|
240,000
|
3.93
|
3.75
|
48
|
F-36
2007 Directors Equity Incentive Plan
The
2007 Directors Plan terminated by its terms on September 24, 2017,
and no further options may be granted thereunder. However, the
options outstanding thereunder continue to remain outstanding and
in effect in accordance with their terms. The 2007 Directors Plan
permitted the grant of options covering up to an aggregate of
500,000 shares of Common Stock to its directors in the form of
nonqualified options and restricted stock. The exercise price of
the nonqualified options is 100% of the fair value of the
underlying shares on the grant date. The options have five-year
contractual terms and are generally exercisable immediately as of
the grant date.
As the
2007 Directors plan terminated in fiscal 2018, the Company did not
grant any options pursuant to the 2007 Director Plan during the
twelve months ended June 30, 2021.
There
were 200,000 stock options exercised during the twelve-month ended
June 30, 2021. The Company did not recognize any stock-based
compensation expenses during the twelve months ended June 30,
2021.
There
were 50,000 stock options expired, while no stock options were
exercised during the twelve-month ended June 30, 2020. The Company
did not recognize any stock-based compensation expenses during the
twelve-month ended June 30, 2020.
As of
June 30, 2021, there were vested director stock options covering a
total of 50,000 shares of Common Stock. The weighted average
exercise price was $4.14 and the weighted average remaining
contractual term was 0.75 years. The total fair value of vested
directors' stock options as of June 30, 2021 was $72. All director
stock options vest immediately at the date of grant. There were no
unvested director stock options as of June 31, 2021.
As of
June 30, 2020, there were vested director stock options covering a
total of 250,000 shares of Common Stock. The weighted average
exercise price was $3.32 and the weighted average remaining
contractual term was 0.83 years. The total fair value of vested
directors' stock options as of June 30, 2020 was $301. All director
stock options vest immediately at the date of grant. There were no
unvested director stock options as of June 30, 2020.
A
summary of option activities under the 2007 Directors Plan during
the twelve months ended June 30, 2021, is presented as
follows:
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted Average
Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
Outstanding at July
1, 2020
|
250,000
|
3.32
|
0.83
|
22
|
|
Granted
|
-
|
-
|
-
|
-
|
|
Exercised
|
(200,000)
|
3.12
|
-
|
-
|
|
Forfeited or
expired
|
-
|
-
|
-
|
-
|
|
Outstanding at June
30, 2021
|
50,000
|
4.14
|
0.75
|
45
|
|
Exercisable at June
30, 2021
|
50,000
|
4.14
|
0.75
|
45
|
A
summary of option activities under the 2007 Directors Plan during
the twelve months ended June 30, 2020, is presented as
follows:
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted Average
Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
Outstanding at July
1, 2019
|
300,000
|
3.40
|
1.58
|
9
|
|
Granted
|
-
|
-
|
-
|
-
|
|
Exercised
|
-
|
-
|
-
|
-
|
|
Forfeited or
expired
|
(50,000)
|
3.81
|
-
|
-
|
|
Outstanding at June
30, 2020
|
250,000
|
3.32
|
0.83
|
22
|
|
Exercisable at June
30, 2020
|
250,000
|
3.32
|
0.83
|
22
|
F-37
25. LEASES
Company as Lessor
Operating
leases under which the Company is the lessor arise from leasing the
Company’s commercial real estate investment property to third
parties. Initial lease terms generally range from 12 to 60 months.
Depreciation expense for assets subject to operating leases is
taken into account primarily on the straight-line method over a
period of twenty years in amounts necessary to reduce the carrying
amount of the asset to its estimated residual value. Depreciation
expenses relating to the property held as investments in operating
leases were $72 and $67 for the years ended June 30, 2021 and 2020,
respectively.
Future
minimum rental income in China and Thailand to be received from
fiscal year 2022 to fiscal year 2023 on non-cancellable operating
leases is contractually due as of June 30, 2021, as
follows:
|
2022
|
$145
|
|
2023
|
$16
|
|
|
$161
|
Future
minimum rental income in China and Thailand to be received from
fiscal year 2021 to fiscal year 2022 on non-cancellable operating
leases is contractually due as of June 30, 2020, as
follows:
|
2021
|
$120
|
|
2022
|
$114
|
|
|
$234
|
Sales-type
lease which the Company is the lessor arise from lease of four
units Chiller System. The Company classifies its lease arrangements
at inception of the arrangement. The lease term is 3 years,
contains an automatic transfer of title at the end of the lease
term and a guarantee of residual value at the end of the lease
term. The customer is required to pay for executory cost such as
taxes.
Financing
receivables, consisting of net investment in sales-type leases and
receivables from financed sales of four units of chiller systems
are as follows:
|
|
June
30,
|
|
|
Components
of Lease Balances
|
2021
|
|
|
Assets
|
|
|
|
Gross financial
sales receivable
|
$65
|
|
|
Unearned finance
income
|
(7)
|
|
|
Financed Sales
Receivable
|
$58
|
|
|
|
|
|
|
Net
financed sales receivables due within one year
|
$19
|
|
|
Net
financed sales receivables due after one year
|
$39
|
|
As of
June 30, 2021, the financed sale receivables had a weighted average
effective interest rate of 13.2% and weighted average remaining
lease term of 2.75 years.
Company as Lessee
The
Company has operating leases for corporate offices and research and
development facilities with remaining lease terms of one year to
three years and finance leases for plant and
equipment.
F-38
Supplemental
balance sheet information related to leases is as follows (in
thousands):
|
|
|
June
30,
|
|
Components
of Lease Balances
|
Classification
|
2021
|
|
Assets
|
|
|
|
Operating
lease assets
|
Right-of-use
asset-operating, net
|
$1,876
|
|
Finance
lease assets
|
Property, plant
& equipment
|
1,413
|
|
Accumulated
amortization
Right-of-use
asset
|
|
(1,199)
|
|
Assets
|
Property, plant
& equipment
|
$214
|
|
Total
Leased Assets
|
|
$2,090
|
|
Liabilities
|
|
|
|
Operating
Lease Liabilities
|
|
|
|
Current
portion
|
Current portion of
lease liability- operating
|
$672
|
|
Long-term
portion
|
Lease liability-
operating, net of current portion
|
1,204
|
|
Total
Operating Lease Liabilities
|
|
$1,876
|
|
Finance
Lease Liabilities
|
|
|
|
Current portion of
finance leases
|
Current portion of
lease liability- finance
|
$197
|
|
Net of current
portion of finance leases
|
Lease liability-
finance, net of current portion
|
253
|
|
Total
Finance Lease Liabilities
|
|
$450
|
|
|
|
|
|
Total
Lease Liabilities
|
|
$2,326
|
|
|
3
Months Ended
|
12 Months
Ended
|
|
Lease
Cost
|
June 30,
2021
|
|
|
Finance lease
cost:
|
|
|
|
Interest on lease
liabilities
|
7
|
$42
|
|
Amortization of
right-of-use asset
|
74
|
334
|
|
Total Finance Lease
Cost
|
81
|
376
|
|
|
|
|
|
Operating Lease
Costs
|
$199
|
$765
|
|
|
|
|
F-39
Other
information related to leases was as follows (in thousands except
lease term and discount rate):
|
|
June
30,
|
|
|
2021
|
|
Cash
paid for amounts included in the measurement of lease
liabilities
|
|
|
Operating
cash flows from finance leases
|
$(40)
|
|
Operating
cash flows from operating leases
|
$(764)
|
|
Right-of-use
assets obtained in exchange for new operating lease
liabilities
|
$932
|
|
|
|
|
Weighted
average remaining lease term (years):
|
|
|
Finance
leases
|
2.72
|
|
Operating
leases
|
3.09
|
|
Weighted
average discount rate:
|
|
|
Finance
leases
|
3.56
|
|
Operating
leases
|
4.60
|
As of
June 30, 2021, the maturities of the Company's operating and
finance lease liabilities were as follow:
|
|
Operating
Lease Liabilities
|
Finance
Lease Liabilities
|
|
Fiscal
Year
|
|
|
|
2022
|
748
|
218
|
|
2023
|
537
|
137
|
|
2024
|
313
|
111
|
|
2025
|
291
|
22
|
|
Thereafter
|
156
|
-
|
|
Total future
minimum lease payments
|
$2,045
|
$488
|
|
Less: amount
representing interest
|
(169)
|
(38)
|
|
Present value of
net minimum lease payments
|
1,876
|
450
|
|
|
|
|
|
Presentation on
statement of financial position
|
|
|
|
Current
|
$672
|
$197
|
|
Non-Current
|
$1,204
|
$253
|
As of
June 30, 2020, the maturities of the Company's operating and
finance lease liabilities were as follows:
|
|
Operating
Lease Liabilities
|
Finance
Lease Liabilities
|
|
Fiscal
Year
|
|
|
|
2021
|
509
|
265
|
|
2022
|
317
|
211
|
|
2023
|
168
|
133
|
|
2024
|
-
|
107
|
|
Thereafter
|
-
|
20
|
|
Total future
minimum lease payments
|
$994
|
$736
|
|
Less: amount
representing interest
|
(50)
|
(70)
|
|
Present value of
net minimum lease payments
|
944
|
666
|
|
|
|
|
|
Presentation on
statement of financial position
|
|
|
|
Current
|
$477
|
$231
|
|
Non-Current
|
$467
|
$435
|
F-40
26. NONCONTROLLING INTEREST
In
accordance with the provisions of ASC Topic 810, the Company has
classified the noncontrolling interest as a component of
stockholders’ equity in the accompanying consolidated balance
sheets. Additionally, the Company has presented the net income
attributable to the Company and the noncontrolling ownership
interests separately in the accompanying consolidated
financial statements.
Noncontrolling
interest represents the minority stockholders’ share of 45%
of the equity of Trio-Tech Malaysia Sdn. Bhd., 45% interest in
SHI International Pte. Ltd., and 24% interest in Prestal Enterprise
Sdn. Bhd., which are subsidiaries of the Company.
The
table below reflects a reconciliation of the equity attributable to
noncontrolling interest:
|
|
For the Year Ended June
30,
|
|
|
Noncontrolling
interest
|
2021
|
2020
|
|
Beginning
balance
|
$1,180
|
$1,195
|
|
Net (loss)/
income
|
(564)
|
238
|
|
Dividend declared
by a subsidiary
|
(189)
|
(235)
|
|
Translation
adjustment
|
(8)
|
(18)
|
|
Ending
balance
|
$419
|
$1,180
|
27. PAYCHECK PROTECTION PROGRAM LOAN
The
Coronavirus Aid, Relief, and Economic Security (CARES) Act created
the Paycheck Protection Program (PPP) to provide certain small
businesses with liquidity to support their operations during the
COVID-19 pandemic. The PPP
is a loan program designed to provide a direct incentive for small
businesses to keep their employees on payroll.
The
loans have a 1% fixed interest rate and are due in two years with
payment deferred for the first six months. However, they are
eligible for forgiveness (in full or in part, including any accrued
interest) under certain conditions and are subject to audit by the
U.S. government. The loans
will be forgiven if the loan proceeds were used for eligible
purposes, including payroll, benefits, rent and utilities, and the
Company maintained its payroll levels for eight weeks.
In May
2020, the Company received loan proceeds in the amount of
approximately $121 under the PPP. The Company accounted for the PPP
loan as a financial liability in accordance with Accounting
Standards Codification (ASC) 470 Debt after considering the following
aspects: (1) the legal form of a PPP loan is debt regardless of
whether the Company expects the loan to be forgiven and (2) given
the degree of uncertainty and complexity surrounding the PPP loan
forgiveness process, this may impact a Company’s initial
assessment.
Under
ASC 470, the Company recognizes a liability for the full amount of
PPP proceeds received and accrues interest over the term of the
loan. No additional interest was imputed at a market rate because
the guidance on imputing interest in ASC 835-30 excludes
transactions where interest rates are prescribed by a government
agency. If any amount is ultimately forgiven (i.e., the Company is
legally released from being the loan’s primary obligor in
accordance with ASC 405-20), income from the extinguishment of the
liability would be recognized in the income statement as a gain on
loan extinguishment. The Company intended to use the proceeds for
purposes consistent with the PPP. Hence, the Company expects that
its use of the loan proceeds will meet the conditions for
forgiveness of the loan.
During
fiscal 2021, the Company received approval from the Small Business
Administration (SBA) that the full loan of $121 had been forgiven.
The forgiveness of the PPP loan has been included as a separate
line under disclosure note Other
income, net.
F-41
Exhibit 10.6
TRIO-TECH INTERNATIONAL
AMENDMENT TO 2017 DIRECTORS EQUITY INCENTIVE PLAN
Section 4 of the 2017 Directors Equity
Incentive Plan of Trio-Tech International is amended to read in its
entirety as follows:
"4. Stock
Subject to Plan. There shall be reserved for issue
upon the exercise of options granted, or restricted stock awarded,
under the Plan 600,000 shares of Common Stock or the number of
shares of Common Stock which, in accordance with the provisions of
Section 9 hereof, shall be substituted therefor. Such shares may be
authorized but unissued shares or treasury shares. If an option
granted under the Plan shall expire or terminate for any reason
without having been exercised in full, unpurchased shares subject
thereto shall again be available for the purposes of the
Plan..”
Exhibit
23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Trio-Tech
International
Van
Nuys, California
We
hereby consent to the incorporation by reference in the
Registration Statements on Form S-3 No. 333-38082, Form S-8 No.
333-222920, Form S-8 No. 333-193515, Form S-8 No. 171569, Form S-8
No. 333-14781 and Form S-8 No. 333-252841 of Trio-Tech
International of our report dated October 1, 2021, relating to the
consolidated financial statements which appear in this Form
10-K.
Mazars
LLP
PUBLIC
ACCOUNTANTS
AND
CHARTERED ACCOUNTANTS
Singapore
October
1, 2021
CERTIFICATIONS
Exhibit
31.1
I, S.
W. Yong, certify that:
1. I
have reviewed this Annual Report on Form 10-K of Trio-Tech
International, a California corporation;
2.
Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The
registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15(d)-15(f)) for the registrant and
have:
(a)
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated
the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
(d) Disclosed
in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most
recent fiscal year quarter (the registrant's fourth fiscal year
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial
reporting.
5. The
registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons
performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information;
and
(b)
Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date:
October 1, 2021
/s/ S.W.Yong
S. W. Yong, Chief Executive Officer
and
President (Principal Executive Officer)
Exhibit
31.2
I,
Victor H. M. Ting, certify that:
1.
I have reviewed
this Annual Report on Form 10-K of Trio-Tech International, a
California corporation;
2.
Based on my
knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this report;
3.
Based on my
knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4.
The registrant's
other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15(d)-15(f)) for the registrant and
have:
(a)
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(d)
Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal year quarter (the registrant's
fourth fiscal year quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting.
5.
The registrant's
other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the
equivalent functions):
(a) All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information;
and
(b) Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date:
October 1, 2021
/s/ Victor H. M.
Ting
Victor
H. M. Ting, Chief Financial Officer
and Vice President (Principal Financial Officer)
Exhibit
32
SECTION
1350 CERTIFICATION
Each of
the undersigned, S.W. Yong, President and Chief Executive Officer
of Trio-Tech International, a California corporation (the
“Company”), and Victor H.M. Ting, Vice President and
Chief Financial Officer of the Company, do hereby certify, pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to the best of his knowledge (1)
the annual report on Form 10-K of the Company for the year ended
June 30, 2021, as filed with the Securities and Exchange Commission
on the date hereof (the “Report”), fully complies with
the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, and (2) the information contained
in the Report fairly presents, in all material respects, the
financial condition and results of operations of the
Company.
/s/
S.W.Yong
Name: S. W.
Yong
Title:
President and Chief Executive Officer
Date:
October 1, 2021
/s/ Victor H. M. Ting
Victor
H. M. Ting
Title: Vice
President and Chief Financial Officer
Date:
October 1, 2021
A
signed original of this written statement required by Section 906,
or other document authenticating, acknowledging, or otherwise
adopting the signature that appears in typed form within the
electronic version of this written statement required by Section
906, has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or
its staff upon request.